Winter fuel payments 2025: How the tax recovery works

Many pensioners received their winter fuel payment automatically in November or December 2025. While the payment continues to be made in the usual way, individuals with higher levels of income may see the full amount recovered through the tax system.

We’ve outlined how this works and what to consider for the 2025/26 tax year.

When does recovery apply?

For the winter 2025 payment, recovery applies where an individual’s total income for 2025/26 exceeds £35,000.

Key points to note:

• The £35,000 threshold applies to each individual separately.
• It is based on total income before personal allowances or other deductions.
• Household income is not considered.

This means that in a couple, one person may keep their full payment while the other has theirs recovered, depending on their respective income levels.

Who is not affected?

The recovery does not apply where an individual was receiving certain income-related benefits during the qualifying week in September 2025. These include:

• Pension Credit
• Universal Credit
• Income Support
• Income-based Jobseeker’s Allowance
• Income-related Employment and Support Allowance

In these cases, the winter fuel payment is not clawed back through taxation.

How is the payment recovered?

The method depends on how you pay tax.

If you are taxed under PAYE: HMRC will normally adjust your 2026/27 tax code, so the amount is collected gradually through salary or pension payments. For example, a £200 payment would typically be spread across the year rather than collected in one lump sum.

If you complete a Self-Assessment tax return: The amount will be included in your 2025/26 return. Online returns are due by 31st January 2027 (or 31st October 2026 for paper submissions). HMRC is expected to pre-populate many returns, but it remains the taxpayer’s responsibility to ensure the position is correct.

Some tax codes issued early in 2026 may not immediately reflect the adjustment, but revised codes are expected to follow automatically.

Choosing not to receive the payment

Individuals can opt out of receiving future winter fuel payments rather than having them recovered later through taxation.

Opt-outs are handled by the Department for Work and Pensions, or by Social Security Scotland for residents in Scotland. Elections generally need to be made each year.

If someone opted out but later expects their 2025/26 income to fall below £35,000, they can opt back in, provided they do so before 31st March 2026.

Why it’s worth reviewing your position

Although the winter fuel payment continues to be paid automatically to most eligible pensioners, those with income above the £35,000 threshold will not retain the benefit in practice.

Reviewing expected income before the end of the tax year can help ensure there are no surprises and allow time to consider whether opting in or out is appropriate. Our Chartered Tax Advisors are on hand to answer any questions you have – get in touch today.