The Labour government, led by Prime Minister Andy Burnham and Chancellor John Healey, is set to enforce a Winter Fuel Payment clawback that will see some state pensioners lose £33 a month. This charge applies to retirees born before 1960 who receive the Department for Work and Pensions (DWP) benefit and have an annual income exceeding £35,000.
How the Winter Fuel Payments Charge Works
In June 2025, the government announced that from winter 2025/26 onwards, all people over State Pension age would again be eligible for Winter Fuel Payment. However, individuals with incomes above £35,000 a year must repay it through the tax system, known as the Winter Fuel Payments Charge. This means that over three quarters of pensioners will benefit, with devolved administrations in Northern Ireland and Scotland following the same policy.
HMRC explains: "Unless you opt out of receiving the payment, we’ll collect your payments for the 2 tax years by changing your tax code for the 2027 to 2028 tax year. For example, if you receive a payment in each tax year of £200, we’ll deduct about £33 each month extra in tax in the 2027 to 2028 tax year."
Payment Amounts and Who Is Affected
The payouts are worth £200 to state pensioners born between 1946 and 1960, and £300 for older retirees. This policy is not new from Burnham and Healey; they inherited it from former Chancellor Rachel Reeves. Now in charge, they are responsible for overseeing and administering it.
Pensioners must repay the amount through their usual Self Assessment tax return, and they cannot pay it sooner. The payment must be included on tax returns for each tax year from the 2025 to 2026 tax year onwards.
Filing Your Tax Return
If you file your tax return online, HMRC will automatically include the amount of your payment as a tax charge where possible. It will show on your 2025 to 2026 return as the Winter Fuel Payment charge. You should check that your payment is automatically shown on your online return and include it if it is not. For paper Self Assessment tax returns, you need to add the payment to your 2025 to 2026 tax return.
HMRC states: "You currently cannot make the payment when you submit your tax return using your compatible software. We’ll receive confirmation that you got a Winter Fuel Payment." After submitting your return for the 2025 to 2026 tax year, HMRC will write to you confirming how much you need to pay and how and when to make the payment using HMRC’s online payment services. They advise: "You should wait for us to contact you before trying to make the payment."
Impact on Pensioners
This clawback affects pensioners with incomes above £35,000, which includes those with private pensions or other significant income sources. For those affected, the monthly deduction of £33 represents a notable reduction in their annual income, potentially impacting their budgeting and financial planning. The policy aims to target support to those most in need while ensuring fiscal responsibility, but it has drawn criticism from some pensioner advocacy groups who argue it unfairly penalizes retirees who have saved for their retirement.
As the government moves forward with this charge, pensioners are advised to review their tax affairs and ensure they comply with the new requirements to avoid any unexpected tax bills.
