Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment her Department has made of the projected financial impact of the new 12% premium insurance rate for Motability leases on (a) Motability users and (b) the car industry.

At Budget 2025, the government announced tax changes to the Motability scheme, which will save over £1 billion over the next five years.

The VAT relief for top-up payments made to lease more expensive vehicles will be removed for new leases from 1 July 2026, and Insurance Premium Tax will apply at the standard rate to new insurance contracts on the Scheme from 1 July 2026. The tax changes will not apply to vehicles designed, or substantially and permanently adapted, for wheelchair or stretcher users.

These tax changes ensure Motability can continue to deliver for its customers, for example through the continued provision of a broad range of vehicle models available without any top-up payments. Further detail on the impacts of the tax changes can be found in the Tax Impact and Information Note here:

Motability Scheme: reforming tax reliefs - GOV.UK.