Winter Fuel Payment 2025–26 – Important Update for Higher Earners

The Winter Fuel Payment (WFP) has long been a valuable source of support for older households during the coldest months of the year. It is designed to help people of pension age cover the rising cost of heating, offering a one-off payment each winter.

For winter 2025–26, however, there is a significant policy change that will particularly affect higher earners. While the payment will continue to be made in November or December 2025, HMRC will now recover the money from individuals whose annual income exceeds a set threshold.

If you were born before 22 September 1959 and live in England, Wales, or Northern Ireland, you may be entitled to receive between £100 and £300. But if your income for the tax year ending 5 April 2026 is above £35,000, the payment will no longer act as an additional benefit. Instead, it will effectively become a temporary advance that HMRC will reclaim the following year.

This marks a fundamental shift in how the Winter Fuel Payment operates and is something all potential recipients should be aware of.

Who is eligible?

To receive the Winter Fuel Payment for 2025–26, you must meet the following conditions:

• You were born before 22 September 1959
• You are living in England, Wales, or Northern Ireland during the qualifying week

Eligibility does not depend on your current financial circumstances, and payments are made automatically if HMRC has your details. However, the recovery rules for higher earners now mean that income levels will directly influence whether you keep the money.

It is important to note that arrangements in Scotland may differ, as winter heating support there is administered separately by the Scottish Government

What happens if your income is over £35,000?

If your total income for the 2025–26 tax year exceeds the £35,000 threshold, HMRC will recover the Winter Fuel Payment. The way this happens depends on how you pay tax:

• PAYE taxpayers: If you are employed or receive a pension taxed through PAYE, HMRC will adjust your 2026–27 tax code. This spreads the repayment evenly across the tax year. For example, if you receive a £200 WFP, your take-home pay will be reduced by about £17 per month between April 2026 and March 2027.
• Self-Assessment taxpayers: If you complete a tax return, the Winter Fuel Payment will be added to your 2025–26 tax return as taxable income. The repayment will form part of your balancing payment due by 31 January 2027.

There is no separate repayment form to complete. HMRC will handle the process automatically, ensuring recovery is built into your existing tax arrangements.

Why has this change been introduced?

The Government has signalled that the change is designed to better target winter fuel support towards households most in need. Rising energy prices and the ongoing cost of living pressures have placed additional strain on public finances, leading to a reassessment of universal benefits like the WFP.

By introducing an income threshold, policymakers hope to ensure that the payment continues to support pensioners with modest means while reducing expenditure on wealthier households who are less reliant on this seasonal benefit.

Options available to you

For those approaching retirement age or already in receipt of the Winter Fuel Payment, the new recovery rules raise several important considerations.

1. Check your situation

HMRC has launched an online tool that allows you to check whether recovery will apply to you and how the repayment would be collected. This can help you understand in advance whether you will actually benefit from the payment.

2. Opt out in advance

If you are confident that your income will exceed £35,000 in the 2025–26 tax year, you can choose to opt out of receiving the WFP altogether. This may save you the inconvenience of receiving the payment only to have it clawed back later.

• Opt-out requests must be made by 15 September 2025.

3. Plan ahead

If you are unsure whether you will exceed the income threshold, it may still make sense to accept the WFP. For those who later fall above the threshold, repayment will be managed automatically by HMRC.

However, you may want to factor in how recovery will affect your take-home pay (for PAYE taxpayers) or your future tax bill (for Self-Assessment taxpayers).

What this means for pensioners and families

For pensioners with incomes below £35,000, the Winter Fuel Payment remains an important source of support at a time of year when heating costs are highest. For those above the threshold, the change essentially converts the WFP into a short-term advance rather than a lasting benefit.

Families and individuals should consider whether opting out might provide more certainty and reduce future tax adjustments. On the other hand, some may prefer to receive the money up front and let HMRC manage recovery later.

Next steps

If you believe you or a family member may be affected by this change, it is important to:

• Review your expected income for the 2025–26 tax year
• Use HMRC’s tool to check whether recovery applies
• Decide whether opting out before 15 September 2025 is the best choice for your circumstances

If you remain eligible, the Winter Fuel Payment can still play a vital role in helping with heating costs. But if your income is likely to exceed the threshold, planning ahead now can help you avoid unexpected adjustments to your income or tax bills later.

If you would like personalised advice on how these rules apply to your situation — or help with completing an opt-out request — please get in touch call us on 0208 858 4303 or send an email to info@finsburyrobinson.co.uk .