Anyone over 66 who has an income of or less than £35,000 a year will be eligible for the payment this winter, while those earning more will still be sent the money but then have it clawed back through the tax system.
It comes as part of an attempt by the Labour leadership to shore up support among their own MPs and the public in the wake of a poor local election result last month.
Reeves restricted the payment last year to people on pension credit, which amounted to just 1.3 million out of the nearly 11 million pensioners in England and Wales.
Those with a taxable income of more than £35,000 will then repay the money through the tax system, via either PAYE or self-assessment. The Government estimates that around 9 million people will be eligible for the payment this winter.
In theory, the clawback mechanism could see the estates of higher-earning pensioners who have died forced to repay their winter fuel allowance, but the Treasury said that HMRC would not seek repayment from deceased people whose only tax debt is winter fuel.
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“But we have now acted to expand the eligibility of the winter fuel payment so no pensioner on a lower income will miss out. This will mean over three quarters of pensioners receiving the payment in England and Wales later this winter.”
Downing Street hopes that restoring the winter fuel payment to most pensioners will satisfy Labour MPs who have been angry about Government spending cuts, while also helping to arrest the rise of Reform UK.
“This humiliating U-turn will come as scant comfort to the pensioners forced to choose between heating and eating last winter. The Prime Minister should now apologise for his terrible judgement.”
Liberal Democrat leader Sir Ed Davey added: “Finally the Chancellor has listened to the Liberal Democrats and the tireless campaigners in realising how disastrous this policy was, but the misery it has caused cannot be overstated.”
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