Winter Fuel Payments 2025/26: How HMRC will recover payments from higher-income pensioners

The UK government has announced that all pensioners in England and Wales will receive winter fuel payments for the 2025/26 season. However, pensioners with taxable income over £35,000 will have the full amount of the payment recovered via the tax system.

How will recovery work?

The recovery process will be automatic and handled by HMRC using existing tax systems. Pensioners do not need to take any action.

1. Pay as you earn (PAYE)
   If a pensioner receives income through PAYE (e.g. from a private or occupational pension), HMRC will:
   – Adjust their tax code
   – Recover the payment gradually through slightly increased monthly tax deductions
   
2. Self assessment (SA)
   For pensioners who file a Self Assessment tax return:
   – The winter fuel payment will be added to their annual tax bill
   – Payment will be due by the standard self assessment deadline (usually 31 January)

Opting out

The government plans to introduce a simple opt-out system for pensioners who do not wish to receive the payment. This will help avoid unnecessary tax adjustments for those who know they exceed the income threshold.

Details of the opt-out process are expected to be released later this year.

Who will be affected?

Around 2 million pensioners are expected to have their payments recovered through the tax system.
The £35,000 income threshold applies to individual taxable income, not household income.

Payment amounts

– £200 for households with someone between state pension age and 79
– £300 for households with someone aged 80 or over
– Payments will be shared among pensioners in the household if no income-related benefits are received

Expert concerns

Katherine Ford, Technical Manager – Personal Taxes at ICAEW, commented:

Although this is welcome news for many pensioners, it will put an additional burden on an already over-stretched HMRC. A digital-only solution may not be appropriate for the digitally-excluded.

What pensioners should do?

– Check your income to see if you’re likely to exceed the £35,000 threshold
– Monitor your tax code or self assessment statements for adjustments
– Stay informed about the opt-out process and any updates from HMRC

Please get in touch with the team should you have any questions.