HMRC has recently confirmed significant changes to the Winter Fuel Payment, also known as the Pension Age Winter Heating Payment in Scotland. Starting from November, the payment will continue to assist individuals aged 66 and older with their heating costs. However, a new income cap is being introduced that sets the eligibility threshold at £35,000.
Income Cap and Payment Recovery
Individuals who earn more than £35,000 annually will no longer qualify for the payment. The government will continue to disburse the funds initially and will subsequently reclaim the excess from those who exceed the income limit through the tax system. This decision is expected to impact approximately 2 million individuals. The typical repayment amount may reach up to £300 per person.
Reclaim Methods
The recovery process will vary based on how individuals are taxed:
- Pay As You Earn (PAYE): For those on PAYE, repayment amounts will be deducted directly from monthly salaries or pension incomes.
- Self Assessment: Individuals filing tax returns will see the amount added to their tax bill for the following year.
Future Changes in Payment Collection
Beginning in 2027, HMRC plans to modify the payment collection process further. During that year, two payments will be collected: one to address overpayments made in 2026 and another in advance for the 2027 disbursement. As a result, some individuals may face total deductions of up to £600 throughout the year.
Monthly Deductions Explained
For PAYE customers, a typical payment of £200 will see a monthly deduction of about £17, while in the 2027-2028 tax year, this will rise to approximately £33 per month due to the simultaneous collection of payments from both years. Following that period, the monthly deduction will revert to about £17 for the 2028-2029 tax year.
Opting Out of the Payment
Individuals who anticipate exceeding the £35,000 income limit may opt out of receiving the Winter Fuel Payment for 2026. Instructions on how to opt out will be available at gov.uk or mygov.scot starting April 1, 2026. Options will include online requests, phone calls, or postal applications.
