Millions of UK pensioners could receive their Winter Fuel Payment only to have the money recovered through their tax bills. Under the government’s income rules, retirees earning more than £35,000 must repay the allowance, with HMRC set to recover payments automatically.
Why Some Pensioners Will Have Their Winter Fuel Payments Recovered
Around two million pensioners are expected to be affected by the recovery rules, according to the Oxford Mail. The system allows eligible pensioners to receive their winter heating allowance before HMRC determines whether their income exceeds the repayment threshold.
The Winter Fuel Payment provides £200 to eligible pensioners under 80 and £300 to those aged 80 or older. Anyone whose annual income exceeds £35,000 must repay the amount received.
The change has prompted mixed reactions among pensioners in Oxfordshire, where residents have been receiving letters confirming their payments.
Barbara Jones said: “I just received my letter; it means that I can have the heating on longer when it is cold.”
Others face a different outcome. Kim Corbey of Oxford said: “I was told it was coming, but because I still work, they would be taking it back.”
How HMRC Will Recover the Money Through Tax Codes
Pensioners who exceed the income threshold will generally not need to arrange repayments themselves. HMRC will recover the money through the tax system, depending on how individuals normally pay their taxes.
For pensioners covered by Pay As You Earn (PAYE), HMRC will adjust their tax codes, increasing the amount deducted from their income.
HMRC guidance states:
“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.
“For example, for a typical payment of £200, you’ll pay approximately £17 per month extra in tax.
“You’ll get a letter or a notification in the HMRC app to tell you that we’ve changed your PAYE tax code.
“We’ll review all of the tax you paid against the tax you were due to pay. If we have been unable to collect the full amount due during the tax year, in your tax code, we’ll send you a tax calculation.”
The adjustment means pensioners may keep their original payment temporarily, with the equivalent amount subsequently collected through higher tax deductions.
What Happens to Pensioners Who File Tax Returns?
Those already registered for Self Assessment will have their Winter Fuel Payment recovered through their tax returns rather than through a PAYE adjustment.
An HMRC spokesperson said:
“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.”
Income from employment, pensions and savings can contribute toward the £35,000 threshold.
For the 2025–2026 payment cycle, the qualifying week ran from September 21 to September 28, 2025. Pensioners who did not decline their payments before the relevant deadline could still receive the money even if they subsequently had to repay it.
HMRC has confirmed that affected PAYE taxpayers will receive notification of their adjusted tax codes by letter or through the HMRC app.
