HMRC is set to begin recovering Winter Fuel Payments from over two million state pensioners, with changes to tax codes taking effect from April 2026. More than one million pensioners will see adjustments to their PAYE codes as the tax authority reclaims payments from higher-income retirees.
Who is affected?
According to government figures, approximately 2.2 million pensioners, including 1.3 million on PAYE, will be required to repay their Winter Fuel Payment for the 2025/26 tax year. For someone who received a £200 payment, this equates to an extra £17 in tax per month.
How will HMRC recover the payment?
Azets, an accountancy firm, explained: "If your total taxable income for 2025/26 exceeds £35,000 and you currently file self-assessment tax returns, the payment will be recovered automatically by HMRC via your 2025/26 tax return." For those not in the self-assessment system, HMRC will adjust the 2026/27 PAYE tax code instead.
Option to opt out
Individuals with income above £35,000 can choose to opt out of receiving the Winter Fuel Payment altogether, avoiding the clawback. For residents in England, Wales, and Northern Ireland, this is done by contacting the Winter Fuel Payment Centre by telephone or post. The deadline for opting out of the winter 2025 payment is 15 September 2025. The Scottish government is expected to provide further details on opting out in due course.
Reinstating the payment
If you opted out because you expected to exceed the £35,000 threshold but your actual income falls below it, you have until 31 March 2026 to opt back in and receive the payment. A review of your 2025/26 income levels may be worthwhile before 31 March 2026 if you believe you will be close to the threshold.
Payment amounts for winter 2025
For winter 2025, Winter Fuel Payments of between £100 and £300 will be paid automatically to those in England, Wales, and Northern Ireland born before 22 September 1959. In Scotland, individuals may be eligible for the Pension Age Winter Heating Payment instead, with amounts ranging from £101.70 to £305.10. Eligibility is based on being born on or before 21 September 1959.
