HMRC has set a cut-off date of mid September for pensioners to opt out of winter fuel payments to avoid tax clawback of whole amount.
After the chancellor u-turned on winter fuel payments for the 2025-26 winter period after intense pressure, some complicated new rules came into place which mean only pensioners with less than £35,000 in total income for tax purposes will qualify for the benefit in future, and there are crucial opt out provisions.
The final deadline for pensioners to tell HMRC they do not want the payment is Monday 15 September. If the threshold of £35,000 is exceeded by just £1 the whole amount will be clawed back by HMRC so it is really important to take action, warned tax experts at ICAEW.
Pensioners in England, Wales and Northern Ireland can opt out by filling in an online form or by writing to or calling HMRC by the deadline.
Opting out is important for anyone above the heating benefit’s threshold as otherwise the amount will be clawed back through the tax system. The payment is worth between £100 and £300 depending on age.
John Havard, a consultant at Blick Rothenberg, said: ‘The default is that any age qualified individual will receive the winter fuel payment.
‘But a “wealthier” individual with an income over £35,000 will be subject to a tax claw back. Given this will be a complex process, and just £1 of income above the £35,000 limit is enough to trigger a clawback, those in favour of a simple life will need to opt out of winter fuel payment before the deadline.’
Anyone with pension age family members and clients should check urgently whether they want to opt out to ensure they do not receive a surprise tax bill next summer. They can opt out online easily or phone the winter fuel payment centre on 0800 731 0160 and select option 2. There is a long preamble with the usual caveats to go online.
HMRC has set up an online tool to check eligibility and tax status to help with the initial decision whether to opt out. This asks for details on the pensioner’s taxable income, including pensions, dividends, rental income, savings interest, state benefits, and so forth.
Before using the online tool, make sure to have details of the total amount of state and also personal pension payments to hand, calculated ‘to the nearest pound’ for the period 6 April 2025 to 5 April 2026.
Basically, the tool calculates eligibility and then if you qualify HMRC still gives the choice to opt out, but also features a large text message on a green background stating: ‘HMRC will not take back your Winter Payment’.
Katherine Ford, ICAEW technical manager, tax, said: ‘If a person with income over £35,000 receives the payment, it will be recovered automatically through their pay as you earn tax code for 2026-2027, unless they are in self-assessment, in which case it will be added by HMRC to their tax return for 2025-2026.
‘If they fill in a paper self-assessment tax return, they will need to remember to include it on the return.’
What if income fluctuates?
If income fluctuates and the pensioner falls below the threshold during the winter period, they will still be able to receive the payment backdated as long as certain deadlines are met.
Ford added: ‘A pensioner may have believed that their income would exceed £35,000 and therefore opted out. If their income for 2025-26 turns out to be £35,000 or less, they have until 31 March 2026 to opt back in to receive the payment.
‘Pensioners who have opted out, and anyone who helps them with their finances, may want to set a reminder to review their income in early to mid-March 2026.’
Watch out for scammers
It is also critical to watch out for scammers as these are targeting people of all ages saying they can sort the payments. They are very persistent and operating totally illegally as the payments are universal within the threshold. In June alone, HMRC had to remove a shocking 4,600 fake websites linked to winter fuel payments.
So, the message is do everything on the official gov.uk website, or through your accountant or a very trusted adviser.
Note that for pensioners in Scotland, there is a different system with the pension age winter heating payment, but there will also be the £35,000 income limit, although details on how to opt out will not be available until the autumn, the Scottish government said. Pensioners in Northern Ireland may be eligible for winter fuel payment from the Northern Ireland Executive.
Useful links
HMRC online tool, Check if HMRC will take back your Winter Payment
Government/HMRC form, Opt out of winter fuel payment
Winter Fuel Payment contact details Tel: 08007310160
Article taken from Business & Accountancy Daily
