Winter Fuel Payment 2025: UK pensioners face tax on winter fuel allowance - new HMRC rule changes explained
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Pensioners earning a certain amount will see their Winter Fuel Payments reclaimed 💡
- Millions of pensioners are expected to receive letters this month about Winter Fuel Payment changes
- Those earning over £35,000 may have to repay some or all of the support, averaging £300
- Repayments will be collected through tax (PAYE or Self Assessment), not directly from bank accounts
- Pensioners can opt out of future payments to avoid repayments if their income exceeds the threshold
Millions of pensioners are set to receive letters this month explaining changes to the Winter Fuel Payment, with some facing repayments of up to £300 if they earn above a new income threshold.
The news has caused concern, with a few inaccurate headlines leading to worries that HM Revenue & Customs (HMRC) will be taking £300 from bank accounts. This isn’t quite true, and understanding the process can help avoid unnecessary worry.
The Winter Fuel Payment, sometimes called the Winter Heating Payment in Scotland, is a long-standing support scheme designed to help older people with heating costs during the colder months.
Normally, those aged 66 and over automatically receive the payment each year, with no application needed.
But starting this year, the Government has introduced an income cap: anyone earning over £35,000 annually will have to repay some or all of the support.
Understanding the new system can help pensioners plan ahead and avoid any surprises on their tax bills.
How repayments will work
Instead of withholding payments upfront, the Government will initially pay the Winter Fuel Payment to everyone who qualifies. HMRC will then reclaim the money from higher earners through the tax system.
It’s important to note that the money will not simply be taken directly from bank accounts.
Repayments will instead be managed through existing tax arrangements, either via Pay As You Earn (PAYE) deductions from pensions or salaries, or through adjustments to tax bills for those who complete a Self Assessment return.
Estimates suggest around 2 million pensioners will be affected by the repayment scheme, with the average reclaim expected to be around £300.
For PAYE recipients, HMRC plans to spread repayments over the year to make the process more manageable. For instance, a typical £200 repayment might be deducted at around £17 per month.
Opting out if you earn over the threshold
Pensioners who are confident that their income will exceed the £35,000 threshold have the option to opt out of receiving the 2026/27 Winter Fuel Payment altogether.
The opt out deadline for this winter's payment has passed, but you can opt out for future years via post, phone, or online through government websites such as gov.uk or mygov.scot from April 1, 2026.
Opting out can prevent the need for future repayments, which may be a useful option for those who prefer to avoid tax adjustments.
Changes coming in winter 2026/27
The repayment system is set to become slightly more complex for the winter of 2026/27, when HMRC will collect two payments in the same tax year.
One will cover overpayments from 2025/26, while the other will be an advance for the 2026/27 Winter Fuel Payment.
This could result in deductions of up to £600 across the year for some individuals, although repayments will then return to normal levels in subsequent years.
HMRC has said that this approach is intended to prevent delays in reclaiming overpayments and keep the system up to date.
How to claim the Winter Fuel Payment
For the majority of pensioners, receiving the Winter Fuel Payment remains simple and automatic, but a small number of people will need to apply for the payment manually.
This could include those who have deferred their State Pension or missed previous payments.
Manual claims can be made by post immediately or by phone from Monday 13th October. The deadline for applications for this year’s payment is March 31, 2026.
The Winter Fuel Payment Centre can be contacted by phone at 0800 731 0160, or by post at: Winter Fuel Payment Centre, Mail Handling Site A, Wolverhampton, WV98 1LR.
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