State pensioners born before 1960 who earn more than £35,000 a year will have £200 deducted from their Winter Fuel Payment, as the government moves to claw back the benefit through the tax system. The measure, confirmed by HMRC, will affect retirees receiving the Department for Work and Pensions (DWP) payment from the 2025/26 tax year onwards.
Who is affected by the £200 clawback?
Under the new rules, all individuals over State Pension age are eligible for the Winter Fuel Payment, but those with total incomes above £35,000 will see the £200 payment recovered via their tax code. The policy applies to pensioners born after 1946 and before 1960, who qualify for the standard £200 payment.
HMRC guidance states: “If your total income for the tax year is £35,000 or less — you’ll keep your payment. If it is more than £35,000 — HMRC will take back your payment.” The clawback is individual-based, meaning that if one partner earns above the threshold and the other does not, only the higher earner loses the payment.
How the repayment process works
According to HMRC, pensioners affected will be notified in April 2026 via letter or email that their tax code has been changed to recover the Winter Fuel Payment. This will appear as an underpayment in their tax code. After confirming income for the 2025/26 tax year, HMRC will reassess whether repayment is still necessary.
The tax authority explains: “If you do not need to repay the Winter Fuel Payment, we’ll update your tax code to remove it. We’ll also ask your pension provider or employer to refund the extra amount you already paid through your pension or employment.” If the full amount cannot be collected during the tax year, a tax calculation will be sent to the pensioner.
Impact on pensioners and households
The measure is designed to target Winter Fuel Payments at those with lower incomes, but it has sparked concern among pensioner groups who argue that the £35,000 threshold does not account for regional living costs or household expenses. For example, a pensioner with a private pension and part-time earnings could easily exceed the limit.
An HMRC spokesperson said: “We are committed to ensuring that Winter Fuel Payments are directed to those who need them most. The tax code adjustment is a fair and efficient way to recover payments from higher-income pensioners.”
What pensioners should do now
Pensioners who believe they may be affected are advised to check their total income for the 2025/26 tax year, including earnings, pensions, and savings interest. Those with incomes above £35,000 should anticipate the clawback and plan accordingly. HMRC will begin issuing notifications in April 2026.
The DWP has confirmed that the Winter Fuel Payment remains available to all state pensioners, but the tax system will now act as a means-testing mechanism. This change is part of broader efforts to manage public finances while maintaining support for vulnerable older people.
