HMRC will deduct £17 a month from state pensioners under 80 who exceeded the £35,000 earnings threshold, reclaiming their Winter Fuel Payment via tax code changes. The deductions apply to those who received the payment but were not entitled to it under the new earnings-based system.
New tax codes and repayment process
Following changes to the Winter Fuel Payment system, which is now tied to a £35,000 earnings threshold, most state pensioners keep their £200 to £300 payments. However, an estimated two million pensioners who earned more than the threshold will have to pay the money back.
HMRC will adjust pensioners' tax codes and send a letter or app notification to inform them of the change. For those under 80, who normally receive £200, the repayment will be £17 per month.
Guidance and repayment details
HMRC's guidance on Gov.uk states: “You’ll need to wait for us to take back the payment, you cannot pay it sooner. We’ll take your payment for the 2025 to 2026 tax year by changing your PAYE tax code for the 2026 to 2027 tax year. This means you’ll pay more tax each month to pay back the full payment that you received in the 2025 to 2026 tax year.”
For a typical payment of £200, pensioners will pay approximately £17 per month extra in tax. The guidance adds: “You’ll get a letter or a notification in the HMRC app to tell you that we’ve changed your PAYE tax code. We’ll review all of the tax you paid against the tax you were due to pay. If we have been unable to collect the full amount due during the tax year, in your tax code, we’ll send you a tax calculation.”
HMRC response
An HMRC spokesperson said: “The majority of people who need to pay back a Winter Fuel Payment will do so automatically via their tax code. For those already registered for Self Assessment, it will be collected via their tax return. We’ve provided online guidance clearly explaining how recovery of payments works, and a calculator so people can see if they’ll need to pay back the payment.”
Pensioners who normally submit a self-assessment tax return will have the payment recovered through that route instead of a tax code change.
