Speculation is mounting that the government is to make sweeping changes to the Motobaility scheme in the Budget next month in order to claw back revenues for the Treasury
The Telegraph reported that Chancellor Rachel Reeves is considering scrapping tax breaks for disability benefit claimants to raise £1.2bn a year.
Around 800,000 claimants who qualify for a new car under the Motability scheme are currently exempt from VAT and insurance premium tax (IPT). The Telegraph It reported that the reliefs are to be axed
The Motability scheme allows certain welfare recipients to trade their benefits for a new car. They must pay upfront for any cost that exceeds the value of their benefits.
Removing the tax breaks would mean more claimants would need to make an advance payment for their cars, which would boost tax receipts by an estimated £1.2bn. The scheme currently costs taxpayers £2.8bn a year.
The charity responsible for the scheme, the Motability Foundation, said that the average lease price would increase by £6,500 if VAT was passed on in its entirety.
The Times reported that she may also restrict the scheme to remove luxury brands including BMW and Mercedes which are available for the tax breaks under it. More than 40,000 benefits claimants are currently using Motability to give them access to such high-end cars.
Bank of Ireland has also increased the amount it has set aside for the redress scheme. It doubled the amount from £143m to £350m.
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