The recovery will take place through the Pay As You Earn (PAYE) system for most taxpayers, with HMRC adjusting tax codes so that the amount is repaid gradually during the 2026–27 tax year.
The change follows government rules under which pensioners who received a Winter Fuel Payment but earn above the income threshold must repay the allowance through the tax system. According to HMRC, the process will happen automatically for most affected individuals, removing the need for them to contact the department in most cases.
HMRC Explains How the Automatic Repayment Will Work
According to HMRC, a typical recipient who received a £200 Winter Fuel Payment and has an annual income above £35,000 will repay the money through higher monthly tax deductions during the 2026–27 tax year. The tax authority said that, for PAYE customers, this would generally amount to approximately £17 extra in tax each month until the payment has been recovered.
HMRC has also published an example showing how the adjustment would operate. In the illustration, a pensioner receives a total annual income of £37,710, consisting of £25,737 from a private pension and £11,973 from the State Pension. The individual also received a £200 Winter Fuel Payment in December.
According to HMRC, that person’s personal allowance of £12,570 would be adjusted, resulting in a new tax code of K39. Under that revised code, the taxpayer pays additional tax on £399 of income, producing an increase in deductions of around £17 per month. HMRC estimates that up to two million people across Britain could be affected by the automatic recovery process through PAYE.
Pensioners Urged to Remain Alert to Scams
Alongside confirming the repayment arrangements, HMRC has warned pensioners to be cautious of fraudsters who may attempt to exploit the changes.
The department advises anyone receiving a suspicious text message claiming to be from HMRC to forward it to 60599. Suspicious emails should be sent to [email protected], while suspected scam phone calls can be reported through GOV.UK. Individuals who believe money has been stolen are advised to contact their bank immediately and report the incident to Report Fraud. In Scotland, reports should be made to Police Scotland by calling 101.
According to HMRC, customers who are uncertain about whether they will need to repay the Winter Fuel Payment can use an online tool available through GOV.UK rather than contacting the department directly.
HMRC Chief Customer Officer Myrtle Lloyd said criminals frequently impersonate the tax authority through fake letters, emails, telephone calls and text messages in an attempt to obtain money or personal information.
“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,” Lloyd said.
The repayment arrangements apply under Department for Work and Pensions rules requiring State Pension recipients who earn more than £35,000 annually to repay the £200 or £300 Winter Fuel Payment they received. For most affected pensioners, HMRC says the recovery will be made automatically through adjustments to their PAYE tax code during the current tax year.
