Motor vehicle leasing schemes

Last updated: 10/12/2025

At Budget 2025, the government announced that vehicles leased through the Motability Scheme, or equivalent schemes, will be subject to 20% VAT on top-up payments made in addition to the transfer of eligible welfare payments for more expensive vehicles on the scheme.
Insurance Premium Tax will also be applied at the standard rate of 12% for insurance related to vehicles leased through the scheme.
Timing: the amending legislation is included in Finance (No. 2) Bill 2024-26, and will apply with effect from 1 July 2026.

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