HMRC sending new tax codes to state pensioners over winter fuel | Personal Finance | Finance

HMRC will send new tax codes out to state pensioners in order to take their winter fuel payment back if they broke the earnings threshold this winter. 

Following changes made to the previous, unpopular winter fuel payment system which was tied to Pension Credit, this winter is the first time the winter fuel payments have been made with the new £35,000 threshold in place.

The new system for the payments of up to £300 means that everyone receives a payment, but an estimated two million state pensioners who earned more than the £35,000 threshold are set to be made to pay it back to HMRC.

State pensioners aged under 80 receive £200, and those aged 80 or over receive £300 by default. In HM Revenue and Customs’ guidance published via Gov.uk, state pensioners have been told how it will work in practice for those who need to surrender the payment.

State pensioners who earned more than £35,000 from any income sources, whether it’s work or savings income, will have to wait for HMRC to take back the money via a change in their tax code, unless they normally submit a self-assessment tax return, or are asked to by the taxman.

This means HMRC will adjust pensioners’ tax code and send them a letter to tell them what their new tax code is, and recover the payment from their income each month.

Their guide says: “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 you’ll pay more tax each month to pay back the full payment that you received in the 2025 to 2026 tax year.

“For example, for a typical payment of £200, you’ll pay approximately £17 per month extra in tax.

“You’ll get a letter or a notification in the HMRC app to tell you that we’ve changed your PAYE tax code. 

“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.”

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. For those already registered for Self Assessment, it will be collected via their tax return. 

 “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.”