The UK Government has announced a significant update to the Winter Fuel Payment scheme for the 2025/26 winter season. While the payment remains a vital source of support for pensioners during colder months, a new income-based recovery mechanism has been introduced to ensure the system remains fair and fiscally sustainable.
What’s New?
From winter 2025/26, all pensioners in England and Wales will receive the Winter Fuel Payment automatically, regardless of whether they are in receipt of benefits. The payment amounts remain unchanged:
- £200 for households with someone between State Pension age and 79.
- £300 for households with someone aged 80 or over.
However, a new income threshold of £35,000 has been introduced. Pensioners with taxable income above this threshold will still receive the payment, but it will be recovered in full by HMRC through the tax system.
How Will the Recovery Work?
The recovery will be handled automatically by HMRC using existing income data. The method of recovery depends on how a pensioner’s income is reported:
- PAYE: For those receiving income through pensions or employment, the recovery will be made via adjustments to their tax code.
- Self Assessment: Pensioners who already file a Self Assessment tax return will have the payment recovered through their return.
Will You Need to File a Tax Return?
While most pensioners will not need to take any action, those with income above £35,000 who are not currently in Self-Assessment may be required to register and file a tax return. This is to enable HMRC to recover the Winter Fuel Payment where it cannot be done through PAYE.
Further guidance is expected from HMRC later in the year, and pensioners are encouraged to monitor updates on GOV.UK for the latest information.
Opting Out
The government has also confirmed that a simple opt-out system will be introduced for pensioners who prefer not to receive the payment. This may be particularly useful for those who know they will exceed the income threshold and wish to avoid the recovery process.
Considerations and Commentary
According to the Institute of Chartered Accountants in England and Wales (ICAEW), the policy is expected to affect around 2 million pensioners. While the automatic recovery mechanism is designed to reduce administrative burden, ICAEW has raised concerns about the potential strain on HMRC’s already stretched resources and the risk of digital exclusion for some pensioners.
Helen Marshall, Personal Tax Manager at Burgis & Bullock commented:
“Although this is welcome news for many pensioners, this will be a large burden for HMRC who are already struggling. This coupled with Making Tax Digital for Income Tax, may be a step too far. Furthermore, with the push to move everything online and to reduce access to HMRC via telephone calls, some pensioners will find it extremely difficult to contact HMRC to rectify any issues that arise as a result of this.”
Summary
- All pensioners in England and Wales will receive the Winter Fuel Payment.
- Taxable income over £35,000 will trigger full recovery of the payment by HMRC.
- Recovery will be automatic via PAYE or Self-Assessment.
- Some pensioners may need to file a tax return if not already doing so.
- Opt-out option will be available for those who do not wish to receive the payment.
At Burgis & Bullock, we are committed to helping individuals navigate these changes with clarity and confidence. If you’re unsure whether this affects you or need assistance with tax compliance, our team is here to help. Contact us online or call your local office on 0345 177 5500.
*This blog post is intended for informational purposes only and does not constitute legal or financial advice.
