HMRC has confirmed that state pensioners aged 66 to 79 who receive the Winter Fuel Payment will face a £200 tax charge if their personal income exceeds £35,000. The tax authority will reclaim the payment by adjusting tax codes for the 2026-27 tax year, resulting in higher monthly deductions.
Income Threshold and Household Rules
If your total income for the 2025-26 tax year is £35,000 or less, you will keep the full £200 payment. However, if your income surpasses £35,000, HMRC will take back the amount. For households where multiple individuals receive the payment, each person's income is assessed separately. For instance, if one partner earns £36,000 and the other £22,000, only the higher earner will have their payment reclaimed.
Eligibility and Payment Amounts
The £200 Winter Fuel Payment is available to individuals of state pension age (66) who were born before 1946, meaning those under 79. Pensioners aged 80 and over receive £300 instead of £200. The payments are issued by the Department for Work and Pensions (DWP).
Repayment Mechanism
HMRC advises that pensioners cannot repay the £200 as a lump sum; instead, the repayment is automatically collected through a tax code adjustment for the 2026-27 tax year. This means additional monthly tax deductions equivalent to about £17 per month for a typical £200 payment. HMRC states: "We’ll take back your payment for the 2025 to 2026 tax year by changing your tax code for the 2026 to 2027 tax year. This means you’ll pay more tax each month to pay back the full payment."
Examples for Different Taxpayers
For a basic rate taxpayer with total income of £37,710 (comprising a £25,737 private pension and £11,973 state pension), the Personal Allowance of £12,570 is reduced by the state pension amount (£11,973) and an additional £1,000 (to recover the £200 at 20% tax). This results in a negative allowance, which HMRC converts to a K code: K39. For a higher rate taxpayer earning £65,300, the deduction is £11,973 for the state pension plus £500 (to recover £200 at 40%), leaving a positive allowance of £97, resulting in tax code 9L.
These changes apply from the 2025-26 tax year, with the repayment collected in the following year. Pensioners are urged to check their tax codes to ensure correct deductions.
