HMRC is sending new tax codes to state pensioners as part of its effort to reclaim the Winter Fuel Allowance. The Labour government has reinstated the Winter Fuel Payment with a new £35,000 earnings threshold, meaning nine million pensioners will receive the payment, but an estimated two million state pensioners who earned above the threshold will be required to repay it.
How Repayment Works
HMRC will adjust pensioners' tax codes and send a letter notifying them of the change. The repayment will be recovered from their income each month. According to HMRC guidance: “You’ll need to wait for us to take back the payment, you cannot pay it sooner. We’ll take your payment for the 2025 to 2026 tax year by changing your PAYE tax code for the 2026 to 2027 tax year. This means you’ll pay more tax each month to pay back the full payment that you received in the 2025 to 2026 tax year.”
Example of Repayment Amount
For a typical payment of £200, pensioners will pay approximately £17 per month extra in tax. HMRC will notify affected individuals via letter or the HMRC app about the change in their PAYE tax code. At the end of the tax year, HMRC will review the tax paid against the amount due. If the full amount hasn't been collected through the tax code, a tax calculation will be sent.
Self Assessment and Online Tools
An HMRC spokesperson stated: “The majority of people who need to pay back a Winter Fuel Payment will do so automatically via their tax code. For those already registered for Self Assessment, it will be collected via their tax return. We’ve provided online guidance clearly explaining how recovery of payments works, and a calculator so people can see if they’ll need to pay back the payment.”
