HMRC has confirmed that it is changing the tax codes of two million state pensioners who exceeded the earnings limit for the Winter Fuel Payment. The tax authority is issuing letters to inform recipients that the £200 or £300 payments will be reclaimed automatically through the tax system.
Automatic Recovery Process
Nearly two million people are expected to repay their winter 2025 payment because their annual income exceeds £35,000. For most, this will be an automatic process. HMRC will adjust the PAYE tax code for the 2026 to 2027 tax year to recover the amount.
According to HMRC: "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 pensioners will pay more tax each month to repay the full amount received in the 2025 to 2026 tax year.
Example of Repayment
For a typical payment of £200, recipients will pay approximately £17 per month extra in tax. HMRC will send a letter or notification via the HMRC app to inform individuals of the tax code change.
HMRC added: "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."
Warning About Scams
HMRC has seen over 25,000 Winter Fuel Payment scam referrals in the last 12 months and is warning that scammers may use the recovery process as a hook to target this group via texts, emails, and phone calls. HMRC will never contact people to ask them to repay their Winter Fuel Payment or request bank details through these channels.
Self Assessment Customers
For those already registered for Self Assessment, the repayment will be collected via their tax return. 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. 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."
