PAYE14020 - Coding: adjustments to collect tax: Winter Fuel Payment Charge

Introduction

Legislation introduced in Finance Bill (No.2) 2025–26 applies a new Income Tax charge, known as the Winter Fuel Payment Charge (WFPC), to individuals with total income over £35,000 who receive a Winter Fuel Payment or a Pension Age Winter Heating Payment (Scotland), from 6 April 2025.

The winter payment itself is not taxable. Instead, the charge imposes an equivalent Income Tax liability equal to the full amount of the payment received.

The measure applies UK wide following announcements by the Scottish Government and Northern Ireland Executive.

Background

Changes announced in July 2024 restricted Winter Fuel Payments to those on means-tested benefits. In June 2025, the government announced that payments would be reinstated for all pensioners for winter 2025 to 2026, and that the Winter Fuel Payment Charge would apply where total income exceeds £35,000.

The charge is legislated for in schedule 10 of Finance (No.2) Bill 2025–26.

Scottish and Welsh taxpayers

Where an individual is identified as a Scottish or Welsh taxpayer (see and ), the charge is also equal to the full amount of the payment received but the appropriate devolved tax rates must be used when calculating the coding adjustment.

Initially, for 2025 to 2026 and 2026 to 2027, this will only impact Scottish taxpayers but could impact Welsh taxpayers in the future should Welsh tax rates ever change.

The £35,000 threshold applies UK wide, regardless of tax regime.

Conditions for WFPC liability

An individual is liable for the charge where:

  • Their total income for the tax year exceeds £35,000 (before deduction of the Personal Allowance).
  • They receive a Winter Fuel Payment or Pension Age Winter Heating Payment.

WFPC is based on individual income, not household income so one partner may be liable while the other is not.

Exemptions

WFPC does not apply if, during the qualifying week (starting 15 September 2025 for 2025 to 2026), the individual received:

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

The Department for Work and Pensions (DWP) and Social Security Scotland (SSS) are responsible for paying the Winter Fuel Payment and Pension Age Winter Heating Payment and will provide HMRC with details of the payments made but exclude exempt individuals from the data shared with HMRC.

Collection through PAYE

For individuals not within Self Assessment who have a live PAYE source, HMRC will automatically adjust the tax code to recover the charge.

  • Coding adjustments apply from 2025 to 2026 onwards.

Collection through Self Assessment

If the individual is within Self Assessment, HMRC will normally include WFPC on the tax return automatically.  Taxpayers must ensure the correct charge is included and add it if not shown.

No one is required to register for Self Assessment solely because of the charge.

Codes for individuals within Self Assessment will not be automatically updated to include the charge and it will not be part of the SA auto-coding process.

Opting out of receiving winter payments

Individuals expecting income above £35,000 may opt out of receiving future payments:

  • England, Wales, and Northern Ireland – optout service available via DWP
  • Scotland – contact Social Security Scotland

Examples

Example 1 – Income above the threshold

An individual receives a Winter Fuel Payment of £200.00
Total income for the year is £36,000.

WFPC applies, and the full £200.00 is recovered through PAYE or Self Assessment. 

Note: There is no tapering of the Winter Fuel Payment Charge.

Example 2 – Household with differing incomes

Partner A: income £36,000 = WFPC applies.
Partner B: income £22,000 = WFPC does not apply.

Each partner is assessed individually.