HMRC has confirmed that state pensioners whose income exceeds £35,000 will face monthly tax deductions of approximately £17 to recover Winter Fuel Payments issued during the 2025 to 2026 tax year. The Labour government's tax authority will claw back payments ranging from £100 to £300 through automatic adjustments to tax codes for the 2026 to 2027 tax year, impacting nearly two million households.
How the Recovery Works
For pensioners in Self Assessment who submit returns digitally, the Winter Fuel Payment should be automatically included in their 2025 to 2026 tax return, with a filing deadline of January 31, 2027. Those submitting paper returns must include it by October 31, 2026. Pensioners must verify the payment appears and enter it manually if absent.
HMRC stated: "For a typical Winter Fuel Payment of £200, PAYE customers with income more than £35,000 will pay approximately £17 per month extra in tax during the 2026 to 2027 tax year to recover their payment."
Example of Tax Code Adjustment
Illustrating the process for basic rate taxpayers, HMRC provided an example: total income of £37,710, comprising a private pension of £25,737 and State Pension of £11,973. After receiving a £200 Winter Fuel Payment in December, the Personal Allowance of £12,570 is reduced by the State Pension (£11,973) and an additional £1,000 (since 20% of £1,000 equals the £200 to repay), resulting in deductions of £12,973. This leaves a negative tax-free allowance of -£403, generating a tax code of K39, meaning extra tax on £399 of income, equating to around £17 more per month.
Warning from HMRC Chief
Myrtle Lloyd, HMRC's Chief Customer Officer, warned: "Criminals are great pretenders and often use fake letters, emails, calls and texts to impersonate HMRC and trick people into giving them money. I'd encourage anyone who's unsure to use our online tool at GOV.UK to check whether and how their payment will be recovered - there's no need to call us."
