Shutterstock / Pikselstock
This article is for general guidance only and is not financial or professional advice. Any links are for your own information, and do not constitute any form of recommendation by Saga. You should not solely rely on this information to make any decisions, and consider seeking independent professional advice. All figures and information in this article are correct at the time of publishing, but laws, entitlements, tax treatments and allowances may change in the future.
If you’re over 66, you’ll get the winter fuel payment this year – but you might have to pay it back.
You have until midnight on 14 September to opt out of receiving it. Opting out can be worth it for some people, as it means they avoid the cash being clawed back later on.
New rules announced in June mean more people will get the payment this winter, compared to last year. But for the first time, anyone with income over £35,000 will need to pay the money back via the tax system.
Sarah Coles, personal finance expert at Hargreaves Lansdown, says: “If you don’t opt out, and your taxable income is over £35,000, then it will need to be paid back.
“If you normally pay tax through PAYE on your pension or wages, HMRC will change your tax code for the 2026/27 tax year, so you get less pension each month until it is repaid. If you complete a self-assessment tax return, it will be added to your tax return.”
“Neither option is the end of the world, but could come as a nasty surprise if your pension arrives in your bank account and is smaller than you were expecting.”
The winter fuel payment is a tax-free lump sum of between £100 and £300 paid each year to most people over state pension age (for this winter, that means born before 22 September 1959) who live in England or Wales. The idea is the cash helps with heating bills during the colder months, although you can spend the money as you wish.
The energy price cap will rise by 2% from 1 October, meaning higher bills for most people. We don't yet know what the price cap will be from 1 January 2026, but it could be higher still.
Exactly how much winter fuel payment you receive depends on your circumstances in the ‘qualifying week’ of 15-21 September 2025. Payments for couples are usually split – for example, £100 each for a couple who are both aged under 80.
When it was introduced in 1997, the winter fuel payment was available automatically to everyone of state pension age or older. But in July 2024, the government announced that from winter 2024/25, only those in receipt of pension credit or equivalent means-tested benefits would be entitled to the cash. The move drew widespread criticism, with activist groups and unions pursuing legal challenges and calling for the policy to be reversed.
The chancellor announced a U-turn in June 2025, with certain limits. She confirmed that from winter 2025/26 onwards, all pensioners would receive the winter fuel payment in full. But those with taxable income over £35,000 would then have to pay it back. If there’s two of you in the household, and only one person earns over £35,000, that person will have to pay back their share.
If your income is above the £35,000 threshold, HMRC will reclaim the winter fuel payment through the tax system. How this will happen depends on how you pay tax:
If you’re not sure whether your payment will be taken back, HMRC has provided an online calculator to help you work it out.
The winter fuel payment is a devolved matter in Scotland and Northern Ireland. This means the Scottish government and Northern Ireland executive have set their own policies.
The payment and eligibility rules in Northern Ireland are the same as for England and Wales.
In Scotland the rules are very similar, but it's called the pension age winter heating payment. This is worth £203.40, or £305.10 if someone in the household is over 80. This will also be clawed back via the tax system if you earn more than £35,000.
For many people with income over £35,000 a year, it might seem simpler to opt out of receiving the payment rather than receive it and pay it back.
If you live in England, Wales or Northern Ireland, you’ll need to complete the opt out form on the government website on or before 14 September 2025, or call the Winter Fuel Payment Centre helpline (0800 731 0160) before 6pm on 12 September 2025.
If you live in Scotland, you can opt out by completing the opt-out form on Social Security Scotland. The deadline has not been given – the Scottish government says “If you choose to opt out after we've made a decision on your payment, you'll still receive a payment for this year. In this case, you’ll not get the payment from winter 2026-2027 onwards.”
Wherever you live, when you opt out you need to provide personal details such as:
If you want to opt in again – for example, if your income changes – you can do so by calling the helpline.
To get a payment for winter 2025/26 you’d need to opt in again before 31 March 2026.
Caroline Abrahams, charity director at Age UK, says: “Opting out is a matter for each person to decide. The cost of heating your home through the cold months can be high, so some people on incomes over £35,000 may prefer to receive the payment and then settle up with the government later, while others may prefer just to opt out now and not worry about it again.”
The threshold refers to your gross annual income – everything you earn before tax.
This includes:
It does not include tax-free income such as Premium Bond prizes, income from ISAs, lodger income under the Rent a Room scheme, pension credit, attendance allowance, or any other tax-free state benefits.
The £35,000 threshold is based on your taxable income, rather than your total income. By lowering your taxable income, you might be able to qualify for the winter fuel payment, and save on tax too. One of the first things you should do is ensure you’re making the most of ISAs.
Andy Wood, tax adviser at Tax Natives, says: “Many pensioners may not realise that interest earned on savings held outside of ISAs count towards their total taxable income. With interest rates still relatively high, even modest savings can generate income that pushes someone over the threshold.”
You should also have a look at how you take pension income. Taking the 25% tax-free cash from any workplace or personal pensions is not taxable income. But other money from pensions, such as via an annuity, income drawdown or a lump sum is taxable.
If you’re still working, then paying into your pension via salary sacrifice, if your employer allows that, will also reduce your gross income since the pension contributions are taken from your salary before you receive it.
If you have significant savings in ISAs, you may also be able take income from those pots instead of your pension. This would reduce your taxable income, without reducing your overall income.
Another tactic is to defer taking your state pension if you can manage without it. Even if you have started taking your pension you can still defer it – but note you can only do this once.
Wood says: “Deferring your state pension is an option. However, it’s worth saying that deferring it means you will get a larger state pension when you do come to claim it, and this has the potential to push you up into higher tax bands or mean you no longer qualify for benefits you would have otherwise received.
“You also have to weigh up whether it’s worth losing out on a year’s worth of state pension now in order to claim the winter fuel allowance plus a higher state pension later.”
Provided by HUB Financial Solutions Limited
Find out all you want to know about equity release with expert advice.
We explain the government grants designed to make your home warmer, greener, and lower your energy bills.
.jpg?la=en&h=354&w=616&hash=BE59986E855569FEC6926261D767F978)
.jpg?la=en&h=354&w=616&hash=8F1C902484B56EB0A153365B51BD4EBA)
