Policy paper

Winter Fuel Payments charge

Published 26 November 2025

Who is likely to be affected

Pensioners with total annual income over £35,000 and in receipt of a Winter Fuel Payment, or Pension Age Winter Heating Payment in Scotland.

General description of the measure

This measure introduces a new charge equal to the full value of a Winter Fuel Payment or Pension Age Winter Heating Payment (a ‘winter payment’), received by pensioners who have a total income over £35,000.

HMRC will automatically collect the payment for pensioners with total income over £35,000 through PAYE tax codes unless they already file a Self Assessment tax return.

Following announcements by the Scottish Government and Northern Ireland Executive, this tax charge will apply UK wide.

For the 2026 to 2027 tax year, for a typical winter payment of £200, approximately £17 per month will be deducted from a PAYE customer. In the tax year 2027 to 2028, deductions will temporarily rise to approximately £33 per month for a typical payment of £200. This is because HMRC will be recovering payments for both the 2026 and 2027 winter payments in the tax year 2027 to 2028. This supports the transition to in-year recovery of payments, in line with normal PAYE practice. From the tax 2028 to 2029 onwards, deductions will return to approximately £17 per month.

An online calculator is available on GOV.UK to help pensioners assess whether their income exceeds the total income threshold.

Policy objective

This policy supports the government’s objective of targeting support at those who need it the most without requiring means-testing of the payment. The £35,000 threshold is broadly in line with average earnings and well above the income level of pensioners in poverty, balancing support for pensioners with fairness to the taxpayer.

Background to the measure

In July 2024, the government announced that from winter 2024, eligibility for Winter Fuel Payments was dependent on the individual receiving another means-tested benefit.

In June 2025 the government announced that eligibility would be expanded from winter 2025, to include pensioners with total incomes below or equal to £35,000, in addition to the introduction of the charge for pensioners with total income over £35,000.

Detailed proposal

Operative date

The measure will take effect from 6 April 2025, for winter payments made in winter 2025.

Current law

Part 10 of the Income Tax (Earnings and Pensions) Act (ITEPA) 2003 provides for the taxation of social security income.

Proposed revisions

Legislation will be introduced in Finance Bill 2025-26 to apply a new income tax charge under Part 10 of ITEPA 2003 on pensioners with total income over £35,000 who receive a winter payment.

The winter payments themselves are not being made taxable, and the amount received by the pensioner will not be affected by the new charge. It will continue to be paid in full, though pensioners can elect to opt-out of receiving a payment.

The measure of income that will be used is the individual’s total income, as defined in Section 23 of the Income Tax Act 2007. Pensioners can check their total income for the purposes of winter payments using the dedicated HMRC calculator tool.

Pensioners in receipt of certain social security benefits in the qualifying week for winter payments will not be liable to the charge, regardless of their income. These benefits are:

• income support
• income-based jobseeker’s allowance
• pension credit
• income related employment and support allowance
• universal credit

The charge will be collected through PAYE unless the taxpayer is required to file a Self Assessment return for other reasons. If the customer is registered for Self Assessment, then the charge will be reported and paid through the Self Assessment process.

The changes will have effect from the tax year 2025 to 2026 and subsequent tax years. This means that winter payments made in winter 2025 will be subject to the charge.

Summary of impacts

Exchequer impact (£ million)

2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030	2030 to 2031
-1785	-1390	-910	-1330	-1340	-1325

The tax impact (the Winter Fuel Payments charge) of this measure has been included within the overall spending impact in Table 4.1 of Budget 2025. More details can be found in the policy costings document published alongside Budget 2025.

Macroeconomic impact

This measure is not expected to have any significant macroeconomic impacts.

Impact on individuals, households and families

This measure will have an impact on approximately 2.2 million individuals who are in receipt of winter payments and have total income over the £35,000 threshold. Approximately 1.3 million PAYE only individuals will have their payments automatically recovered by HMRC through an amendment to their tax code. For the remaining 900,000 individuals who are in Self Assessment, including around 800,000 who also have PAYE income, the repayment will be made through their Self Assessment return. Where possible, HMRC will pre-populate the tax charge figure onto online Self Assessment returns.

For approximately 100,000 self-employed individuals who receive winter payments and have total income above the threshold, particularly those operating as sole traders, they will need to familiarise themselves with the winter payment tax charge, and ensure it is correctly reported in their tax return. Some may seek professional advice to support accurate reporting.

These measures are not expected to impact on family formation, stability, or breakdown.

These measures are not expected to have an impact on PAYE individual’s experience of dealing with HMRC as the changes do not change any processes or tax admin obligations.

For self-employed individuals, the need to assess liability and report the charge through Self Assessment or Making Tax Digital may increase their administrative burden. While the systems are familiar, this is a new reporting obligation that could affect their experience of dealing with HMRC. To support affected individuals, HMRC will provide updated guidance and communications to help them understand the charge and meet their obligations confidently. HMRC will also pre-populate online Self Assessment returns with the charge to reduce manual entry and improve ease of compliance for digital customers.

Equalities impacts

This measure affects individuals over State Pension age with total income above £35,000, who are not in receipt of qualifying means-tested benefits.

Where a protected group is overrepresented there may be a disproportionate impact. 

The population impacted by this measure are all over State Pension age, and around 72% are estimated to be aged under 80. Males are estimated to be overrepresented, making up 69% compared to 50% of the UK adult population. People with a disability are also estimated to be overrepresented, making up around a third (33%) compared to 26% of the UK adult population. This aligns with the age profile of the population as disability is more prevalent in older age groups.

The population liable for the tax charge is also estimated to have an overrepresentation of people from a White ethnic background (97%) compared to the UK adult population (88%), and also an overrepresentation of those who identify as Christian (around 70% compared to 52% of UK adults). Finally, those in the impacted population are estimated to be more likely to be married (63%) compared to the UK adult population (50%) and are more likely to identify as heterosexual or straight.

Where data was available there were no other protected groups overrepresented.

Administrative impact on business including civil society organisations

There is no impact on businesses as this measure only affects individuals. 

Self-employed individuals impacted by this change are treated as individuals, therefore the impacts to them have been included in the individual section.

This measure is not expected to impact civil society organisations.

Operational impact (£ million) (HMRC or other)

HMRC will incur one-off IT costs to implement this measure, estimated at £10.4 million for the initial year. This covers both IT system updates (including support for PAYE and Income Tax Self Assessment recovery, development of the GOV.UK calculator tool and guidance) and the additional HMRC staff resources required to manage customer contact volumes.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

This measure will be monitored through HMRC’s compliance and reporting systems, including PAYE and Self Assessment data. Opt-out rates and behavioural responses will be tracked. HMRC will maintain regular communication with DWP and devolved administrations to ensure delivery remains proportionate and effective.

Further advice

If you have any questions about this change, email the Income Tax Structure Team at incometaxstructuremailbox@hmrc.gov.uk