HM Revenue and Customs (HMRC) is issuing new tax codes to state pensioners to recover Winter Fuel Payments from those who exceed the earnings threshold this winter. The payments, ranging between £200 and £300, are now made to all recipients, but an estimated two million state pensioners earning more than £35,000 will be required to pay the money back.
How the new system works
Following changes to the previous system, which was linked to Pension Credit, Winter Fuel Payments are now made with a new £35,000 earnings threshold in place. State pensioners aged under 80 receive £200, while those aged 80 or over receive £300 by default.
According to HMRC guidance published on Gov.uk, pensioners earning more than £35,000 from any income sources, including work or savings income, will have the money recovered through a change in their tax code, unless they normally submit a self-assessment tax return or are asked to do so by HMRC.
Recovery process and tax code changes
HMRC will adjust the pensioner's tax code and send a letter informing them of the new code, with the payment recovered from their income each month. The guidance states: "If your total income is over £35,000, HM Revenue and Customs (HMRC) will take your Winter Fuel Payment back. Your partner’s income does not count towards your total income."
The guidance adds: "You can check if your income is over the threshold. You’ll need to provide the total amount of income you expect to receive in the tax year before any deductions. HMRC will usually collect the amount you owe through your tax code. If you complete a Self Assessment tax return, you’ll pay it through your tax bill instead."
Collection details and contact
"If HMRC changes your tax code to pay back your Winter Fuel Payment, they’ll contact you by email or post. This means the tax deducted from your wages, salary or pension will increase. If HMRC are unable to collect the full amount during the tax year they’ll send you a tax calculation letter," the guidance continues.
It further states: "If HMRC is already collecting your 2025 payment, your tax code will change in January 2027 to start collecting your 2026 payment. You will pay approximately £30 to £33 more tax each month if your Winter Fuel Payment is £200 in both years."
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.”
