In June, ICB wrote about the return of the Winter Fuel Allowance. This article provides an update with further information.
The 2024 Restrictions
The universal Winter Fuel Payment was restricted from winter 2024/25 to pensioner households receiving Pension Credit or certain other income-related benefits:
The Reversals
For winter 2025, the means-testing by reference to qualifying benefits and credits is changing to means-testing to taxable income of £35,000 or more:
- In England and Wales, this announcement was made on 09 June 2025 in a Press Release, confirmed in the 11 June 2025 Spending Review;
- In Scotland, the payment is devolved and will be made by Social Security Scotland as the Pension Age Winter Heating Payment; and
- Northen Ireland will mirror the rest of the UK, as announced and the Assembly by Communities Minister Gordon Lyons
Regardless of the UK nation and the legislation needed to bring this into force, where an individual has a total income of over £35,000, HM Revenue and Customs (HMRC) will recover payments through the tax system.
HMRC have now provided an update given that all pensioners will be entitled to the payment, though it will be recovered where income is over £35,000.
Opting Out
It has always been possible to opt out of receiving the payment and, again, this will be possible by the deadline date of 15 September 2025. More information about opting out in Scotland will be available on Gov.Scot later in 2025.
Opting out may be an option for anyone who expects their income from their private pension, State Pension and any other sources to be over £35,000. Otherwise, the payment will be made and subsequently recovered.
For Income Tax Payable via PAYE
Where income is over £35,000, HMRC will automatically collect the payment through a change to the tax code, unless they already file a Self-Assessment tax return. HMRC will change the customer’s tax code which means they will pay more tax until they have paid back the full payment.
For Income Tax Payable via Self-Assessment
Where the taxpayer files a Self-Assessment tax return online, HMRC will automatically populate the payment the payment on the 2025/26 tax return.
If a paper return is submitted, it will be the taxpayer’s responsibility to include the payment on the return.
For Bookkeepers
If you complete tax returns as part of your service, note that you will be required to populate paper tax returns with the Winter Fuel Payment (Pension Age Winter Heating Payment in Scotland). Online ones will be populated by HMRC with data that they hold.
With regard recovering the Payment for winter 2025 via PAYE, HMRC will begin this in tax year 2026/27. From tax year 2027/28, they will also begin recovering the payment in the year that it is paid. This will impact payments made in winter 2027. So, in 2027/28, where applicable, HMRC will be recovering two amounts of the Payment (for the monies paid in 2026 and 2027). HMRC’s systems will only have caught up with recoveries from tax year 2028/29. Simply, if the payment is recovered via PAYE and an adjustment to the tax code is made:
- The tax code for 2026/27 will reflect the recovery of the Payment made in winter 2025;
- The tax code in 2027/28 will reflect the recovery of the Payment made in winter 2026 and winter 2027; then
- The tax code in 2028/29 will reflect the recover of the Payment made in winter 2028
