Pensioners across England and Wales have the option to decline the Winter Fuel Payment for 2026/27, a decision that may help certain individuals avoid a tax bill or subsequent adjustment. Following rules introduced last year, the annual heating allowance is now means-tested and specifically targets those with incomes at or below £35,000.
Automatic Payment and Opt-Out Option
However, the payment will be issued automatically, even if someone's income exceeds that threshold, unless they opt out before the September deadline. In a written statement to DUP MP Gregory Campbell, Pensions Minister Torsten Bell clarified: "Anyone who expects their total income to exceed £35,000 can opt out of receiving future payments via GOV.UK, or through Social Security Scotland if they live in Scotland, and will not be subject to the charge. Opting out applies only to payments not yet made."
For higher-earning pensioners, any payment received will be reclaimed by HM Revenue and Customs (HMRC), usually through amendments to their tax code in the following financial year. Opting out ensures the payment is not distributed initially, preventing the need for it to be repaid later.
Payment Amounts and Eligibility
The Winter Fuel Payment is valued at between £200 and £300 depending on age and circumstances, and is normally paid automatically to qualifying households, reports the Daily Record. Despite the sum being determined by household eligibility, it is distributed to individuals. This allows one person in a partnership to opt out while the other remains entitled to receive their portion, subject to their income.
Last year, many pensioners were unaware they had the option to withdraw before the qualifying week in September, meaning they received the payment and subsequently faced having it clawed back. The qualifying week for the 2026/27 payment will be September 21 to 27, so anyone wishing to opt out must do so before then. Pensioners who opt out but later find their income drops below £35,000 can still submit a claim for the payment up to March 31, 2027.
Income Thresholds and Payments
HMRC states the decision is based on a person's total personal income for the tax year, before deductions. This includes income from a wide range of sources, such as:
- State Pension
- Workplace or personal pensions
- Earnings from employment
- Savings interest
- Dividends from shares
- Rental income or self-employment profits
- Taxable state benefits
- Income from trusts
Where couples both receive the payment, each person's income is assessed separately. For example, if one partner earns £36,000 and the other earns £22,000, HMRC would reclaim the payment from the higher earner while the lower-earning partner would keep theirs.
How the Payment Will Be Taken Back
Pensioners who do not complete a Self Assessment tax return will have the funds reclaimed via their tax code. HMRC will modify the tax code for the subsequent tax year so the repayment is collected incrementally through PAYE. For a typical payment of approximately £200, this would equate to paying roughly £17 monthly in additional tax. Pensioners required to repay the money will receive correspondence from HMRC next month (April) outlining the tax code change and how the repayment will be collected. Should HMRC be unable to recover the full sum through the tax code during the year, a tax calculation may be issued instead.
What Happens If You Submit a Tax Return
Those who submit a Self Assessment tax return will reimburse the Winter Fuel Payment or PAWHP through their standard tax bill. The payment must be declared on the return as a specific "Winter Fuel Payment charge." Those submitting online may find the charge is automatically included in their return; however, HMRC advises taxpayers to verify the figure is present and enter it manually if it appears to be absent. Paper tax returns will require the amount to be filled in manually. HMRC has also released a YouTube video to help pensioners determine whether they are required to repay the payments.
