HMRC Recovers Winter Fuel Payments from Pensioners Above £35,000 Income Threshold via Tax-Code Changes

HM Revenue and Customs has begun recovering Winter Fuel Payments issued to pensioners whose annual income exceeded £35,000 during the 2025-26 tax year. Almost two million pensioner households across the UK are expected to be affected. For a typical £200 payment, PAYE customers will see their monthly tax bills rise by approximately £17 during the 2026-27 tax year, according to HMRC.

The recovery applies to payments worth between £100 and £300 that were issued to households above the income threshold. Pensioners paying tax through PAYE are seeing the amounts collected automatically through changes to their tax codes. Affected households should already have received correspondence from HMRC confirming the adjustments.

The higher deductions began in April 2026 and will continue each month until the full payment is recovered. Pensioners cannot repay the amount early and must wait for HMRC to collect the money through their amended tax code. Those who complete Self Assessment tax returns online should find their Winter Fuel Payment pre-populated within their 2025-26 return, which must be submitted by January 31, 2027.

People submitting paper returns face a deadline of October 31, 2026. HMRC provided an example of a pensioner with a total income of £37,710, made up of £25,737 from a private pension and £11,973 from the state pension, who received a £200 Winter Fuel Payment in December.

The calculation deducts the state pension amount and an additional £1,000 from the Personal Allowance of £12,570, leaving £403 of tax-free income available.

This produces a K39 tax code, meaning the pensioner pays additional tax on £399 of income. The recovery arrangements apply across the UK, including in Scotland where the benefit is known as the Pension Age Winter Heating Payment. In Northern Ireland, Winter Fuel Payments were administered by the Department for Work and Pensions on behalf of the Executive.