Retirees could see their payments docked by as much as £33 under the DWP scheme. Retirees could see their payments docked by as much as £33 under the DWP scheme.

Retirees could see their payments docked by as much as £33 under the DWP scheme.

The mechanism for clawing back the Department for Work and Pensions ( DWP ) Winter Fuel Payment has been confirmed. Retirees could see their payments docked by as much as £33 under the DWP scheme.

State pensioners who were handed Winter Fuel Payments this year, but whose incomes were too high to qualify, will have to give the money back. Nine million retirees were handed the £100, £200 or £300 payouts.

But people with incomes above £35,000 will be forced to hand it back. HMRC will be clawing it back in instalments through changes to tax codes, with a small chunk of pension payments being diverted to the taxman.

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For under-80s who get £200 Winter Fuel Payments, HMRC will be deducting £17 a month. This will happen automatically though tax codes, unless people already file self-assessments.

But the Labour Party government website said this could be £33 by 2027. It said: “If your total income is over £35,000, you’ll need to pay back the payment.

“HMRC will automatically collect the payment through your tax code unless you already file self-assessment tax returns. This means we’ll change your tax code for the 2026 to 2027 tax year. For a typical payment of £200, we’ll deduct approximately £17 per month.

“In the 2027 to 2028 tax year, we’ll deduct approximately £33 per month for a typical payment of £200. This is because we’ll be collecting your payments from 2026 and 2027. It will then return to approximately £17 per month for the 2028 to 2029 tax year.

“If you file your self-assessment tax return online each year, HMRC will automatically include the payment on your 2025 to 2026 tax return as part of your income.”

Ms Reeves said: “Targeting Winter Fuel Payments was a tough decision, but the right decision because of the inheritance we had been left by the previous government.

“It is also right that we continue to means-test this payment so that it is targeted and fair, rather than restoring eligibility to everyone including the wealthiest.

“But we have now acted to expand the eligibility of the Winter Fuel Payment so no pensioner on a lower income will miss out. This will mean over three quarters of pensioners receiving the payment in England and Wales later this winter.”