Why people on £35K should opt out of winter fuel payment by September deadline to avoid HMRC headache

Yahoo

4 hours ago

People earning £35,000 or more will still receive the benefit in their bank accounts - but will then be forced to pay it back in tax.
Millions of pensioners will once again receive the winter fuel payment later this year.
After the government sparked uproar last winter by taking the benefit from 10 million people, chancellor Rachel Reeves confirmed in June it would be restored to pensioners who have an income of less than £35,000 a year.
Those who earn more than the threshold will actually receive the winter fuel payment in their bank accounts as well, though it will be taken back at a later date in tax - prompting experts to urge them to opt out of the scheme before the September deadline to avoid a potential "tax clawback headache".
What is the winter fuel payment?
It's money from the government to help pensioners pay their heating bills over the winter.
The payment is between £100 and £300, depending on each person's circumstances, and will automatically be paid into bank accounts in November or December. People will receive letters before then telling them how much they will get and what account it will be paid into.
The winter fuel payment has been one of the most contentious issues for Sir Keir Starmer's government. Last summer, it decided to limit the payment to only those who claimed pension credit in one of its first acts, aimed at balancing what was described as a £22bn 'black hole' in the public finances.
This meant the number of pensioners receiving the payment was reduced by around 10 million: from 11.4 million to 1.5 million. YouGov polling suggested 57% of Britons were against this.
Who is eligible?
Everyone who was born before 22 September, 1959, and lives in England or Wales, will receive the winter fuel payment.
What are the tax implications for people earning £35,000?
The approximately two million pensioners whose annual income is above the £35,000 threshold will also receive the payment if they don't opt out - though it will be taken back in tax.
The government will take the money back by either changing their 2026/27 tax code or adding the figure to their 2025/26 self-assessment return.
John Havard, a consultant at tax advisors Blick Rothenberg, warned on Monday that anyone who doesn't opt out and earns even £1 above £35,000 could face a "tax headache".
"A 'wealthier' individual with an income over £35,000 will be subject to a tax 'clawback', where the winter fuel payment they receive is required to be returned to the government," he wrote in a blog.
Watch: Reeves on pensioners earning under £35k to get winter fuel payments
"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."
He said the clawback process is "potentially complex" and an "administrative headache".
Havard also said people near the threshold should watch out for any small increases to their income, such as a pension payment, interest or part-time earnings that could "tip someone over the limit and cause them to fall into the clawback process".
Can you opt out of the winter fuel payment?
People can choose to opt out of the winter fuel payment by contacting the government. This has to be done before 15 September. Contact details can be found here.
Read more
Winter fuel allowance: the scammers pounce on government U-turn (The Guardian)
Millions to lose up to £18,000 from pension reforms (The Telegraph)
What is a wealth tax – and would it work in the UK? (The Independent)