The payment is worth £200 for eligible pensioners aged under 80 and £300 for those aged 80 or above. Under the current rules, people with total personal income of £35,000 or less can keep the payment, while those whose income is above that level are required to repay it. The assessment is made individually, rather than on total household income.
How HMRC Is Recovering the Payment through Tax Codes
According to HMRC guidance published on GOV.UK, Winter Fuel Payments relating to the 2025 to 2026 tax year are being recovered through PAYE tax-code adjustments during the 2026 to 2027 tax year for people who are not repaying through Self Assessment.
The change means that rather than making a separate lump-sum repayment, affected pensioners pay additional tax from their pension or employment income. HMRC says people should wait for the department to collect the money and cannot choose to repay it earlier as a lump sum through this process.
For a typical £200 Winter Fuel Payment, HMRC says the additional tax collected is about £17 per month. Pensioners were due to receive a letter or email notification explaining the tax-code change, with the amount appearing as an underpayment.
The department then checks the individual’s confirmed income for the 2025 to 2026 tax year. Where the final figures show that repayment is not required, HMRC says it will amend the tax code again and ask the pension provider or employer to refund any additional tax already collected.
According to HMRC, income considered when deciding whether the £35,000 threshold has been exceeded can include the State Pension, private or company pensions, earnings, savings interest, dividends, trust income and taxable state benefits. Net profits from self-employment and rental income are also included. For jointly received income, such as interest from a joint savings account, only the individual’s own share should be counted.
Different Repayment Arrangements Apply to Self Assessment Taxpayers
People who normally complete a Self Assessment return follow a different repayment route. According to HMRC, the Winter Fuel Payment must be included in the tax return for each relevant tax year from 2025 to 2026 onwards.
Where a return is filed online, HMRC may automatically include the payment as a Winter Fuel Payment charge. Taxpayers are told to check that the amount appears and add it themselves if it does not. Those submitting a paper return must include the payment on their 2025 to 2026 return.
The £35,000 limit remains based on personal income. HMRC gives the example of a couple where one person has income of £36,000 and the other £22,000. In that case, the first person’s payment would be recovered while the second person would keep theirs.
People whose personal income is over the threshold can also opt out of receiving the payment. For those who do receive it, the method and timing of recovery depend on how their tax affairs are handled, with PAYE, Self Assessment and Making Tax Digital users subject to separate collection arrangements.
