Thousands of state pensioners will face tax code changes from April as HMRC reclaims winter fuel payments from those earning £35,000 or more a year. For some, the recovery will mean paying about £17 a month; for others, combined deductions could reach £33 a month.
The system marks the latest shift in winter fuel payment policy. The payment was once universal, but in 2024 the government restricted it to those eligible for Pension Credit, around £11,300 a year or less. That approach lasted one winter before the current system was introduced, in which the payment goes to all pensioners but is recovered from higher earners.
Who is affected?
Under the current system, an estimated two million state pensioners who earn more than £35,000 in a tax year will have the payment clawed back via their tax code. HM Treasury has published guidance on the gov.uk website explaining how the recovery works.
Pensioners can opt out of receiving the payment if they expect to exceed the threshold and want to avoid repaying it. If they do not opt out, HMRC will adjust their tax code.
How much will be taken?
For the winter fuel payment made between November 2025 and January 2026, tax codes will change from April, resulting in repayments of about £17 a month. For those who also receive the payment in the following tax year without opting out, the tax code will be changed again to collect both years' payments, totalling £33 a month.
What HMRC says
In its guidance, HMRC states: "We’ll take your payment for the 2025 to 2026 tax year by changing your 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 example, for a typical payment of £200, you’ll pay approximately £17 per month extra in tax."
It adds: "In April 2026, you’ll get a letter or an email notification to tell you that we’ve changed your tax code to take back your Winter Fuel Payment. This will show as an underpayment. Any tax code letter or notification before this will not include this change."
The guidance continues: "If you receive payments in the 2026 to 2027 and 2027 to 2028 tax years. Unless you opt out of receiving the payment, we’ll collect your payments for the two tax years by changing your tax code for the 2027 to 2028 tax year. For example, if you receive a payment in each tax year of £200, we’ll deduct approximately £33 per month extra in tax in the 2027 to 2028 tax year."
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."
