HMRC is now enforcing a new earnings limit rule for Winter Fuel Allowance, affecting millions of state pensioners. The tax authority is clawing back payments from those whose individual income exceeds £35,000.
How the Clawback Works
Winter Fuel Payments are returning this year, but they are now means-tested based on each person's individual income. If your income is over £35,000, HMRC will recover the payment. For most people, this will happen automatically through Pay As You Earn (PAYE) via a change to your tax code for the 2026/27 tax year.
If you file a self-assessment tax return (for example, because you are self-employed or have a high income), the recovery will be done through your return. It will be included on your 2025/26 return.
What HMRC Says
HMRC states: “You’ll need to wait for us to take back the payment, you cannot pay it sooner. We’ll take your payment for the 2025 to 2026 tax year by changing your PAYE 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 will pay approximately £17 per month extra in tax. HMRC will send a letter or notification in the HMRC app to inform you of the change in your PAYE tax code. They will review all tax paid against the tax due, and if unable to collect the full amount via the tax code, they will send a tax calculation.
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. 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.”
For more information, visit the HMRC website or use the HMRC app to check your tax code and any changes.
