The changes affect pensioners who receive the annual payment but exceed the income threshold for retaining it. According to the Birmingham Mail, HMRC will begin recovering the money from January 2027, with deductions adjusted over subsequent tax years to account for payments covering different winters.
HMRC Sets Out Monthly Deductions for Pensioners Earning Over £35,000
State pensioners with annual incomes exceeding £35,000 will have their Winter Fuel Payments recovered through the tax system. The Department for Work and Pensions (DWP) will continue distributing payments of £200 or £300 to eligible recipients who did not opt out before the deadline.
Payments are scheduled to begin in November 2026, while HMRC will start reclaiming the money from January 2027. For pensioners receiving a typical £200 Winter Fuel Payment, the initial monthly deduction will be approximately £17.
According to HMRC, the recovery process will operate primarily through the Pay As You Earn (PAYE) system. Tax codes will be adjusted so that the amount owed can be collected automatically from wages, salaries or pension income.
Pensioners who have submitted a Self Assessment tax return will follow a different arrangement. Rather than having the money recovered through monthly PAYE deductions, the amount will be included in their tax bill.
The arrangements mean pensioners whose income exceeds the threshold may still receive their Winter Fuel Payment before the corresponding amount is recovered through taxation.
The Birmingham Mail reports that the higher deductions expected during the following tax year are linked to the timing of HMRC’s recovery process, rather than a change in the standard £200 payment used in its examples.
Why Monthly Tax Deductions Will Temporarily Increase to £33
The monthly deductions will change during the 2027–28 tax year as HMRC moves towards recovering Winter Fuel Payments within the same tax year. According to HMRC, deductions for a typical £200 payment will temporarily increase from approximately £17 to around £33 per month. This is because the department will recover payments relating to both the 2026 and 2027 winters during that financial year.
HMRC explained: “HMRC will collect two payments through your tax code at the same time. This means you will pay more tax each month.”
The department also provided an example involving pensioners whose 2025 payment is already being recovered. Their tax codes will change in January 2027 to begin collecting the 2026 payment, resulting in additional monthly tax of approximately £30–£33 where both payments were £200.
A further adjustment will follow in April 2027 for pensioners who have not opted out. HMRC will continue recovering the 2026 payment while beginning to collect the 2027 payment in advance.
The department says the temporary increase supports its transition towards in-year recovery, bringing the collection process into line with normal PAYE practice. From the 2028–29 tax year onwards, monthly deductions for a typical £200 Winter Fuel Payment are expected to return to approximately £17, ending the temporary period in which payments for two winters are recovered simultaneously.
