Winter fuel payment recovery can apply where a pensioner’s income is more than £35,000. HMRC has recently updated its guidance on how the process works.
In Scotland, the winter fuel payment is known as the Pension Age Winter Heating Payment. The payment is kept in full if income is £35,000 or less, but HMRC can recover it if income exceeds that threshold.
When does repayment apply?
Unless they opted out, pensioners will have received the winter fuel payment for 2025/26.
If income is more than £35,000, HMRC will recover the payment.
The threshold applies to each person separately. Where two or more people in the same household received a payment, HMRC looks at each person’s income individually.
For example, if one partner has income of £36,000 and the other has income of £34,000, only the first partner will repay their winter fuel payment.
Which income counts?
For payments received in November or December 2025, HMRC looks at income for the 2025/26 tax year.
All taxable income is included before deductions.
Savings and dividend income are also counted before applying the personal savings allowance or dividend allowance.
However, income from ISAs and other tax-exempt savings is excluded.
Where income comes from a joint source, such as a joint savings account, only your share is included.
How does HMRC recover the payment?
The recovery process depends on whether the pensioner completes a self-assessment tax return.
If they do, they will need to include details of the winter fuel payment on the return. Where repayment is due, it should be included automatically in the self-assessment tax bill.
For everyone else, HMRC will normally recover the payment through their tax code.
What happens with a tax code adjustment?
If HMRC uses a tax code, the payment received in November or December 2025 will be recovered during the 2026/27 tax year.
HMRC does this by amending the tax code, so more tax is paid each month.
For example, a £200 winter fuel payment would mean around £17 extra tax each month.
What should you check?
Winter fuel payment recovery may come as a surprise, especially where income is close to the £35,000 threshold.
It is worth checking:
- total taxable income for 2025/26
- savings and dividend income
- income from any joint sources
- whether a self-assessment tax return is needed
- whether HMRC may adjust the tax code
HMRC has an online tool to check whether your winter fuel payment will be taken back through tax.
If you are unsure how the rules apply, or if a tax code change does not look right, speak to AMMU for advice.