HM Revenue & Customs (HMRC) is issuing revised tax codes to state pensioners in order to recover winter fuel payments from those whose income has exceeded £35,000. The changes, coming into effect for the first time this winter, follow a revision of the payment system for the annual benefit meant to help older people manage heating costs.
Pensioners who have received the payment but whose total income surpasses the designated threshold will have the value of the payment reclaimed through an adjustment to their tax code, rather than through direct repayment.
Background to Winter Fuel Payment Changes
The winter fuel payment scheme has historically provided automatic financial support to pensioners, with the amount awarded based on age and certain eligibility criteria.
Previously, eligibility and repayment rules were linked to claims for Pension Credit, but recent reforms have detached the payment from this benefit. The new rules aim to ensure greater fairness and targeted support, particularly amidst ongoing cost of living pressures faced by older citizens.
New Income Threshold and Payment Structure
Under the revised scheme introduced for winter 2025–26, all qualifying pensioners receive a winter fuel payment, but those earning above £35,000 annually from any source including work, pensions, or savings must pay back the amount received.
Standard payments are set at £200 for those below 80 years of age, and £300 for those aged 80 or over. According to HMRC guidance, an estimated two million pensioners may be affected by the new threshold in the first year of its application.
HMRC Tax Code Adjustments Explained
Instead of requiring immediate reimbursement, HMRC will alter the tax codes for PAYE pensioners exceeding the income threshold to reclaim the payment across the following tax year.
The extra amount due will be deducted from monthly taxable income in 2026–27, effectively spreading the repayment over the year. For example, a recipient owing £200 could see their monthly tax liability increase by around £17. Pensioners will be notified of any changes to their tax code by letter or via the HMRC app.
Guidance for Affected Pensioners
Pensioners subject to these repayments do not need to take specific action to return the payment unless they are self-assessment tax return filers, in which case the sum will be accounted for in their return. HMRC guidance states:
'You’ll need to wait for us to take back the payment, you cannot pay it sooner.' Any shortfalls in collection within the tax year will prompt HMRC to issue a tax calculation for the unpaid amount.
Official Response and Advice
A spokesperson for HMRC explained that most pensioners needing to repay the winter fuel payment will do so automatically via their amended tax code. Those in self-assessment will have the amount recovered through their annual return. The spokesperson 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.' Detailed advice and support are available on the official government website.
Final Summary
HMRC's new approach to recovering winter fuel payments via tax code adjustment is designed to simplify repayment for pensioners with incomes above £35,000. The system minimises immediate financial disruption by spreading the repayment over a full tax year and automatic notification helps ensure transparency.
Eligible pensioners are encouraged to consult HMRC's guidance or utilise digital resources like the Pie app to track income and manage changing tax obligations. The effectiveness and fairness of the new threshold will continue to be the subject of public scrutiny and policy review.
