Background
The government announced last week that winter fuel payments will be reinstated this year for all pensioners in England and Wales with an income of £35,000 or less per annum. This represents a U-turn from last year when the decision was made to limit winter fuel payments to only those pensioners in receipt of pension credits.
The tax-free payments will automatically be made to all pensioners and so those pensioners whose annual income exceeds £35,000 will have their winter fuel payment recovered through the pay as you earn (PAYE) system or, if necessary, through self-assessment.
Detail
Winter fuel payments for 2024/25 in England and Wales were means tested by restricting them to pensioners in receipt of certain benefits, including pension credit. This made it hard for many to qualify for the allowance and limited the payments to those with an income of £11,809 or less for a single household. Following the announcement by the chancellor, Rachel Reeves, last week everyone over the state pension age in England and Wales with an income of £35,000 or less a year will receive a winter fuel payment later this year.
For 2025/26, winter fuel payments in England and Wales will be £200 for households including someone between state pension age and 79, and £300 for households including someone aged 80 or over. The payment will be shared by the pensioners in the household where the household is not in receipt of an income-related benefit. The payment will be recovered from individuals based on their own taxable income. Scotland and Northern Ireland will have their own systems.
The winter fuel payments will be made automatically to all pensioners with no need for anyone to register with HMRC for this purpose or take any further action.
For those pensioners with incomes above the £35,000 threshold, HM Revenue and Customs (HMRC) will automatically recover the full amount of the winter fuel payment they have received either via the PAYE system or via their self-assessment tax return. This follows a similar system to that HMRC are implementing for the high income child benefit charge.
The government has stated that a simple system will be developed for pensioners to opt out of automatically receiving the winter fuel payments removing the need for HMRC to recover the payment if they choose to do so. Details on this will be confirmed by the Treasury in due course.
If you would like more information on the points raised above, or how the changes to the winter fuel payments may impact you please speak to our Tax Director, Jenny Marks.
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