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\u201327 tax year.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
According to HMRC, a typical recipient who received a \u00a3200 Winter Fuel Payment and has an annual income above \u00a335,000 will repay the money through higher monthly tax deductions during the 2026\u201327 tax year. The tax authority said that, for PAYE customers, this would generally amount to approximately \u00a317 extra in tax each month until the payment has been recovered.<\/p>\n\n\n\n
HMRC has also published an example showing how the adjustment would operate. In the illustration, a pensioner receives a total annual income of \u00a337,710, consisting of \u00a325,737 from a private pension and \u00a311,973 from the State Pension. The individual also received a \u00a3200 Winter Fuel Payment in December.<\/p>\n\n\n\n
According to HMRC, that person’s personal allowance of \u00a312,570 would be adjusted, resulting in a new tax code of K39<\/strong>. Under that revised code, the taxpayer pays additional tax on \u00a3399 of income, producing an increase in deductions of around \u00a317 per month. HMRC estimates that up to two million people across Britain could be affected by the automatic recovery process through PAYE.<\/p>\n\n\n\n