Winter Fuel Payments charge takes effect from 6 April 2025

A new income tax charge on Winter Fuel Payments takes effect from 6 April 2025, applying to winter payments made in winter 2025, under legislation to be introduced in Finance Bill 2025-26¹. The charge equals the full value of a Winter Fuel Payment, or Pension Age Winter Heating Payment in Scotland, received by pensioners with total income over £35,000¹. Following announcements by the Scottish Government and Northern Ireland Executive, the charge applies UK wide¹.

The payment itself is not being made taxable and the amount received is not affected; it continues to be paid in full, though pensioners can elect to opt out¹. Pensioners receiving certain social security benefits in the qualifying week are not liable regardless of income: income support, income-based jobseeker's allowance, pension credit, income related employment and support allowance, and universal credit¹. The Low Incomes Tax Reform Group (LITRG) states that each person in a household is assessed separately, and that adjusted net income is not relevant to liability². It adds that ISA interest and dividends, NS&I premium bond income and non-taxable state benefits are excluded from the income calculation, while savings and dividend income outside an ISA must be included².

HMRC will collect the charge automatically through PAYE tax codes unless the pensioner already files a Self Assessment return¹. For 2026 to 2027, a typical £200 payment means approximately £17 per month deducted from a PAYE customer; in 2027 to 2028 deductions temporarily rise to approximately £33 per month because two years' charges are recovered in one year, returning to approximately £17 per month from 2028 to 2029¹. LITRG reports that the 2025 winter payment charge will be collected by adjusting the 2026/27 tax code².

Approximately 2.2 million individuals in receipt of winter payments have total income over the £35,000 threshold; around 1.3 million PAYE-only individuals will have payments recovered through a tax code amendment, and the remaining 900,000, including around 800,000 with PAYE income, will repay through Self Assessment¹. HMRC estimates one-off IT costs of £10.4 million in the initial year¹.

Why it matters for households

Pensioners whose total income exceeds £35,000 and who receive a winter payment will see the full amount recovered through their tax bill rather than paid separately¹. Those taxed only through PAYE will have their tax code adjusted, reducing tax-free allowances so that PAYE tax rises by the amount received; where adjustments exceed allowances, a K code may be generated, and any amount HMRC cannot collect through PAYE may be pursued by simple assessment or a P800 calculation after the tax year ends². Self Assessment filers must enter the winter payment received on their return, in box 1 of page TR5 for 2025/26, and HMRC may pre-populate the figure online². LITRG notes that around 100,000 self-employed individuals above the threshold will need to report the charge in their tax return¹. Eligibility was expanded from winter 2025 to include pensioners with total incomes at or below £35,000, alongside the charge for those above it¹.

What happens next

For the 2026 winter payment, the qualifying week is the week commencing 21 September 2026². The deadline for opting out online is 20 September 2026, or 18 September 2026 by phone; the opt-out form is available until midday on 19 October 2026, and the deadline for opting back in is 31 March 2027². HMRC plans to collect the 2026/27 and 2027/28 charges by adjusting the 2027/28 tax code, with coding adjustments differing slightly for Scottish taxpayers².