UK pensioners could face tax claw-back under winter fuel payment U-turn

This approach is being explored after the Prime Minister announced a reversal of last year's decision to limit the benefit to those receiving Pension Credit.

Downing Street has indicated that final decisions on the implementation will be taken at "a fiscal event" expected to be this autumn's Budget.

Starmer said last week he wanted more pensioners to receive the payment after approximately 10 million were stripped of the benefit last winter.

The reversal comes after the policy proved highly unpopular with voters in this month's English local elections.

The winter fuel payment cuts were announced by Chancellor Rachel Reeves last July, just weeks after the general election.

The reforms limited the benefit in England and Wales to pensioners who receive means-tested pensions credit, removing it from people with incomes of more than £11,800 a year or £18,000 for a couple.

Government officials have confirmed they are considering a simpler option than creating a new means test for the winter fuel payment, which would be "highly complex".

This would involve restoring it as a universal benefit and then recouping the money when high-income pensioners complete their tax returns.

"There are a number of options being considered and that is one of them," said one official close to the discussions.

The payment is worth either £200 or £300 a year per recipient. This approach would avoid the complexity of identifying households with income just above the cut-off for pensions credit.

A similar approach was taken by former Tory chancellor George Osborne when he reduced the eligibility for child benefit for better-off parents. Former Labour shadow chancellor Ed Balls has endorsed this method.

"What they should do is a big U-turn, just say, we're going to restore the winter fuel allowance to everyone and then withdraw it through the tax system from the highest-income pensioners," Balls said on the Political Currency podcast, which he co-hosts with Osborne.

He added: "That's what you did with child benefit and you can do that because the higher income pensioners will be doing their tax return, you have got their income information."

However, analysts warn that modelling access to the winter fuel payment on the child benefit withdrawal system would not be without problem.

The high-income child benefit charge has proved controversial since its introduction in 2010 and has resulted in several high-profile tax tribunal cases.

Emma Rawson, director of public policy at the Association of Taxation Technicians, cautioned that the Government would be "unwise" to use the high-income child benefit charge as a model for restricting access to winter fuel payment.

She added that there were many outstanding problems with the policy that would need to be addressed before applying a similar approach to winter fuel payments.

Rawson also pointed out a key limitation in Balls' suggestion, noting that not all higher income pensioners need to file self-assessment tax returns. Only those with additional income to pay or capital gains to report are required to do so.

This could create a significant gap in the government's ability to recoup payments from wealthier pensioners who aren't captured by the self-assessment system.

As Downing Street continues to explore options for implementing the Prime Minister's U-turn on winter fuel payments, the challenge of creating a fair and efficient system that targets support to those who need it most remains considerable.