The Department for Work and Pensions (DWP) has reminded higher-income pensioners in Scotland, England, and Wales about a new HM Revenue and Customs (HMRC) online tool that helps determine whether Winter Fuel Payments or Pension Age Winter Heating Payments may later be recovered through taxation.
Background on the Changes
Changes to both annual payments were introduced last winter. Under the updated system, Winter Fuel Payments and Pension Age Winter Heating Payments are paid automatically to eligible pensioners unless they opt out. However, HMRC will recover the payment from pensioners whose total individual income exceeds £35,000.
The recovery can happen either through an automatic tax code adjustment in 2026 or through Self Assessment tax returns, according to official guidance.
Income Threshold Details
The £35,000 threshold applies to a person's total taxable income, which includes: State Pension, private and workplace pensions, earnings from employment, savings interest, dividends, rental income, and taxable state benefits.
Income is assessed individually, not by household. This means one person in a couple may have to repay the payment while the other keeps it. For example, a pensioner earning £36,000 whose partner earns £22,000 would repay the payment, while the lower-earning partner would retain it.
Opt-Out Option
Pensioners in Scotland, England, Wales, and Northern Ireland who expect their income to exceed £35,000 can choose to opt out of receiving future payments altogether. The UK Government stated that this could help some people avoid needing to repay the money later through the tax system.
An online opt-out form for Winter Fuel Payment is available on GOV.UK, and a telephone service is also provided for those unable to use the online process. Pensioners in Scotland can opt out by contacting Social Security Scotland on 0800 182 2222, Monday to Friday, 8am to 5pm.
Recovery Process
HMRC confirmed that pensioners cannot repay the payment early as a lump sum. Instead, the money is normally recovered gradually through PAYE tax code changes. A typical £200 Winter Fuel Payment could increase someone's tax bill by around £17 per month during the recovery period.
For those completing Self Assessment tax returns, the repayment will be included as part of their annual tax bill. The UK Government said pensioners who opt out can choose to opt back in later if their circumstances change.
Additional Information
HMRC has also published a video on YouTube to help pensioners understand if they need to pay the payments back. Full details about using the online tool can be found on GOV.UK.
