Thousands of state pensioners across the UK will see a monthly reduction in their finances due to a significant rule change affecting Winter Fuel Payments.
New income rules trigger repayment demands
The Department for Work and Pensions (DWP) has introduced new, means-tested criteria for the 2025/26 Winter Fuel Payment. Previously a universal benefit for all pensioners, the support is now only available to those with a total income below £35,000.
This change means that pensioners with incomes above this threshold who received a payment before Christmas—worth either £200 or £300—did not qualify and must now repay the sum. HM Revenue and Customs (HMRC) has outlined the process for reclaiming these funds directly from households.
How the HMRC clawback will work
For most affected pensioners under the age of 80 who received the standard £200 payment, £17 will be deducted from their income each month. This recovery will be handled automatically through an adjustment to the individual's tax code for the 2026 to 2027 tax year.
The Government confirmed the mechanism, stating: "HMRC will automatically collect the payment through your tax code unless you already file self-assessment tax returns." Those who do complete self-assessment returns will find the payment added as income on their 2025 to 2026 tax return.
The monthly deduction rate is set to temporarily double to approximately £33 per month in the 2027 to 2028 tax year as HMRC collects payments for both 2026 and 2027, before returning to around £17 per month from the 2028 to 2029 tax year onwards.
Ensuring you are not caught by surprise
The key advice for pensioners is to check their expected payments and be aware of the new arrangements to avoid being surprised by a lower income. The deductions will happen automatically, so those with incomes above the new threshold should budget for the reduced monthly amount.
This policy shift marks a fundamental change from the previous universal system, targeting support at pensioners on lower incomes while requiring those better off to pay back the benefit.
