From the 2025/26 tax year, the government has reinstated winter fuel support more widely, but introduced a new Winter Fuel Payment Charge to claw back the payment from higher-income pensioners.

For pensioners in England, Wales and Northern Ireland, the relevant benefit is the Winter Fuel Payment. In Scotland, the equivalent payment is the Pension Age Winter Heating Payment .

The key point is this: if your individual total income for the tax year exceeds £35,000, you may have to repay the full amount of the winter fuel payment through the tax system, unless you fall within a statutory exemption.

How the new charge works

The winter fuel payment itself is not taxable income. Instead, the legislation imposes a separate income tax charge equal to the amount of the payment received.

This means:

• if your total income is £35,000 or less, there is no charge
• if your total income is more than £35,000, the full payment is clawed back
• the rule is a cliff-edge, so there is no taper between £35,000 and any higher figure 

This is different from the High Income Child Benefit Charge. The WFPC is not progressive: once you are over the threshold, the whole payment is charged back.  This effectively makes the payment net zero for higher earners, rather than a “tax” on the benefit.

Whose income matters?

The test is based on the individual recipient’s income, not household income.  Thus:

• your spouse’s or partner’s income does not determine whether you suffer the charge
• if both members of a couple receive a qualifying payment, each is tested separately
• one partner could be charged while the other is not 

What counts towards the £35,000 threshold?

The legislation uses total income, not “adjusted net income.” In practice, this means the threshold is tested before deductions like Gift Aid or personal pension contributions are taken into account.

Included in Total Income	Excluded from Total Income
State & Private Pensions	ISA Interest & Dividends
Employment & Rental Income	Capital Gains
Taxable Savings & Dividends	Premium Bond Wins

Important Note: Because the charge is based on Step 1 income, making Gift Aid donations will not lower your income to bring you back below the £35,000 cliff-edge.

By contrast, for working pensions, salary sacrifice pension arrangements may help keep income below the threshold where they validly reduce taxable earnings before they arise. That is a genuine planning point for those close to £35,000, alongside possible deferral of income where commercially realistic.

Exemptions: when the charge does not apply

Even if your income exceeds £35,000, you are not liable to the charge if you are entitled to a relevant benefit on any day in the qualifying week 

For 2025/26, the qualifying week is the week beginning on the third Monday in September 2025, which is 15–21 September 2025.

The relevant benefits are:

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

Note this exemption depends on entitlement to one of those benefits during the qualifying week, not simply at some other point in the year.

How the charge is collected

HMRC may collect the charge in different ways:

• through Self Assessment for 2025/26
• through a 2026/27 PAYE code where HMRC can code it out
• potentially through end-of-year reconciliation in some cases.

For many pensioners, HMRC expects to collect the charge automatically through PAYE coding from 2026/27, unless they already file a tax return .

That said, the compliance risk should not be understated. HMRC may not hold complete information on all income sources, especially where savings or dividends are involved, so some individuals may still need to consider whether Self Assessment reporting or notification is required.

Opting out: when it makes sense, and how to reverse that

If you expect your income to be clearly above £35,000, opting out of receiving the payment can be sensible because it avoids receiving a benefit that will simply be clawed back later.

Reversing the decision

If you have already opted out and you realise your income will be below the £35,000 threshold, you may revoke that opt-out for 2026/27 by 31 March 2027. The revocation process broadly follows the original opt-out route:

• England, Wales and Northern Ireland: contact the Winter Fuel Payment Centre
• Scotland: contact Social Security Scotland

It’s important to note that entitlement depends on the statutory rules for the payment and the qualifying week, with opt-out and revocation operating within those rules.

Practical planning points near the threshold

For pensioners with income close to £35,000, small differences matter because the charge is all-or-nothing.

Useful planning points include:

• checking whether expected savings income or dividends push total income over the threshold, even if taxed at 0% rates
• remembering that ISA income and capital gains do not count 
• considering whether salary sacrifice can validly reduce taxable earnings before the year end
• considering whether income can be deferred into a later tax year where there is a genuine commercial choice
• not assuming that gift aid or personal pension contributions paid from net income will solve the problem, because they do not reduce total income for this

How bk plus can help  

Get in touch with your usual bk plus contact if you wish to discuss this or any other tax planning matter further.