State pensioners with an annual income above £35,000 will face deductions of approximately £33 per month from their tax payments as the government recovers Winter Fuel Payments through tax code adjustments. The Labour government, led by Andy Burnham and Chancellor John Healey, will recoup up to £300 from eligible pensioners who breach the new income threshold.
New Income Threshold for Winter Fuel Payment
From November onwards, the Winter Fuel Payment will continue to be sent automatically to individuals aged 66 and above to help with heating expenses. However, the introduction of a new income threshold means that those earning more than £35,000 per year will no longer be eligible for the payment. HMRC will recover payments already made by adjusting tax codes, with typical deductions of approximately £17 per month for a standard £200 payment.
For the 2027 to 2028 tax year, the deduction will double to approximately £33 per month for a typical £200 payment. This is because HMRC will be collecting payments from both 2026 and 2027 in that single year, meaning some individuals could face total deductions of up to £600 throughout the year.
How HMRC Will Collect Payments
HMRC explained: "For PAYE customers, 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 payments from 2026 and 2027. It will then return to approximately £17 per month for the 2028 to 2029 tax year."
HMRC also stated: "Unless you opt out of receiving the payment, we'll collect your payments for the 2 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 about £33 each month extra in tax in the 2027 to 2028 tax year. If you receive a payment for the tax year 2028 to 2029 or onwards, we'll collect your payment by adjusting your tax code for the tax year in which you receive the payment."
Opting Out and Next Steps
Pensioners who are confident they will breach the £35,000 income threshold have the option to opt out of receiving the 2026 Winter Fuel Payment. Details on how to opt out are available at gov.uk or mygov.scot from April 1, 2026, and can also be done by phone or by post. This change follows the introduction of the threshold as part of the government's broader fiscal measures, and affected pensioners are advised to review their income levels and decide whether to opt out before the deadline.
