Around four million pensioners will have their monthly state pension payments reduced as HMRC reclaims Winter Fuel Payments from those with annual incomes above £35,000.
The deductions apply because the winter allowance is initially paid to all over-65s, including those who do not meet the new means-testing criteria, so HMRC must recover the funds afterwards by reducing monthly pension payments.
How the deductions work
Winter Fuel Payments are now means-tested, with pensioners qualifying only if their annual income is below £35,000. For a typical £200 payment, the monthly deduction will be £17 this year, rising to £33 a month from April.
The state pension itself will still increase annually. The full state pension, paid to everyone who has retired since 2016, will be worth £1,002 every four weeks from April 2027. The old basic state pension, provided to older pensioners, will be worth £768 every month.
Government explanation
The Government explained: "If your total income is over £35,000, you'll need to pay back the payment. HMRC will automatically collect the payment through your tax code unless you already file self-assessment tax returns."
"This means we'll change your tax code for the 2026 to 2027 tax year. For a typical payment of £200, we'll deduct approximately £17 per month."
"In the 2027 to 2028 tax year, we'll deduct approximately £33 per month for a typical payment of £200. This is because we'll be collecting your payments from 2026 and 2027. It will then return to approximately £17 per month for the 2028 to 2029 tax year."
