HM Revenue and Customs (HMRC) is issuing new tax codes to state pensioners to recover winter fuel payments from those whose income exceeds the £35,000 threshold. The move follows changes to the winter fuel payment system, which is now linked to earnings rather than Pension Credit.
How the new system works
Under the revised rules, most state pensioners receive a payment of £200 (for those under 80) or £300 (for those aged 80 and over). However, an estimated two million pensioners with income above £35,000 from work or savings will be required to pay the amount back.
HMRC guidance on Gov.uk explains that those affected will not be able to repay the sum voluntarily. Instead, the tax authority will adjust their PAYE tax code for the 2026 to 2027 tax year, recovering the payment from the 2025 to 2026 tax year. This means higher monthly tax deductions.
Repayment through tax code
For a typical £200 payment, this equates to approximately £17 extra in tax per month. Pensioners will be notified by letter or through the HMRC app when their tax code changes. If the full amount cannot be collected during the tax year, HMRC will send a tax calculation.
Those who normally submit a self-assessment tax return, or are asked to do so, will have the payment recovered through that process instead.
Official statement
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.”
They added: “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.”
