Millions of state pensioners across the UK are set to see monthly deductions from their income starting in 2026, as HM Revenue & Customs (HMRC) begins recovering Winter Fuel Payments from higher earners.
New Income Threshold for Winter Fuel Payments
According to BBC Radio 4 Money Box journalist Dan Whitworth, significant changes are coming to the Winter Fuel Payment system. From November 2025, the payment will continue to be automatically issued to people aged 66 and over to assist with heating costs during colder months.
The crucial change involves the introduction of a new income cap. Individuals with an annual taxable income exceeding £35,000 will no longer qualify for the support. Rather than withholding payments at the source, the government will initially pay everyone and then reclaim the money from those above the threshold through the tax system.
How the Repayment System Will Work
An HMRC spokesperson clarified the repayment schedule on BBC Morning Live. For Pay As You Earn (PAYE) customers, the deductions will be spread over time. For a typical payment of £200, HMRC will deduct approximately £17 per month.
However, for the 2027 to 2028 tax year, deductions will increase to approximately £33 per month for a typical £200 payment. This is because HMRC will be collecting payments from both the 2026 and 2027 tax years simultaneously. The monthly amount will then return to approximately £17 for the 2028 to 2029 tax year.
There are two primary methods for reclaiming the payments:
- Pay As You Earn (PAYE) - Monthly deductions from salary or pension income
- Self Assessment - The amount added to the following year's tax bill for those who file tax returns
Opting Out and Next Steps
Approximately 2 million people are expected to be affected by this change, with the average amount to be repaid being up to £300. For those confident they will exceed the £35,000 income threshold, an opt-out option will be available.
Details on how to opt out of receiving the 2026 Winter Fuel Payment will be available on gov.uk and mygov.scot from April 1st, 2026. The opt-out process will also be accessible by phone or post, providing multiple avenues for pensioners to manage their payments.
This recovery process represents a significant shift in how Winter Fuel Payments are administered and underscores the government's focus on targeting financial support toward those with lower incomes while ensuring higher earners contribute back through the tax system.
