HM Revenue and Customs (HMRC) has confirmed it will deduct money from state pensioners in the tax years 2026, 2027, 2028 and 2029 under the Winter Fuel Payment clawback scheme. The Labour government will pay eligible state pensioners either £200 or £300 through the Department for Work and Pensions (DWP) Winter Fuel Payment, but HMRC may recover the payment if an individual's income exceeds £35,000.
According to HMRC, the clawback will be implemented by changing the recipient's tax code. For payments made in the 2025 to 2026 tax year, the tax code will be adjusted in the 2026 to 2027 tax year, resulting in higher monthly tax deductions to repay the full amount. For a typical £200 payment, this means an extra £17 per month in tax.
How the Clawback Works for Households
HMRC has clarified that the income threshold is applied individually, not jointly. The tax authority explains: "If you live in a household with someone else who has also received a payment, we’ll look at each person’s individual income separately. For example, if your income is £36,000 and your partner’s income is £22,000, we’ll take back your payment, but your partner will keep their payment."
This means that only those with personal income above £35,000 will face deductions, while lower-income partners retain their full payment. The policy targets higher-income pensioners while protecting those with modest incomes.
Repayment Schedule for 2027-2029
Unless the recipient opts out of receiving the payment, HMRC will also collect payments for the 2026 to 2027 tax year by adjusting the tax code in the 2027 to 2028 tax year. For example, if someone receives £200 in each tax year, they will pay about £33 extra per month in tax during 2027-2028.
For payments received in the 2028 to 2029 tax year and onwards, HMRC will collect the payment by adjusting the tax code in the same tax year in which the payment is received. This ensures that the clawback is applied promptly.
Self Assessment and Tax Returns
HMRC states: "You’ll pay the payment back through your usual Self Assessment tax return, you cannot pay it sooner. Your payment will need to be included on your tax return for each tax year from the 2025 to 2026 tax year."
For those who file online, HMRC will automatically include the payment as a tax charge where possible. It will appear on the 2025-2026 return as the "Winter Fuel Payment charge." Pensioners are advised to check that the payment is automatically shown on their online return and to include it manually if it is not.
The clawback applies to the 2025-2026, 2026-2027, 2027-2028, and 2028-2029 tax years, with deductions spread over subsequent years via tax code changes. Pensioners affected will see higher monthly tax deductions, with the exact amount depending on the payment received and the tax year in question.
