HMRC Adjusts Tax Codes to Recover Winter Fuel Payments

The HM Revenue and Customs is issuing new tax codes to state pensioners to recover Winter Fuel Allowance payments from approximately two million individuals who exceed a £35,000 annual earnings threshold. This recovery process follows a Labour government policy that reinstated the payment scheme with means-testing, which is estimated to save £450 million compared to a universal system. As part of the updated scheme, the Department for Work and Pensions increased the payment by £100 for pensioners over age 80, bringing their total to £300 per household.

Recovery will occur via PAYE tax code adjustments for the 2026 to 2027 tax year, resulting in higher monthly tax deductions. For pensioners receiving a typical £200 payment in both 2026/27 and 2027/28, charges are estimated at £17 per month in the first year, rising to roughly £33 per month in 2027/28. Those registered for Self Assessment will process recoveries through their tax returns, while others will be notified via letter or the HMRC app. Pensioners can avoid these charges by opting out of the payments.

Chancellor of the Exchequer Rachel Reeves stated that means-testing the benefit ensures it is targeted and fair. HM Revenue and Customs has advised pensioners to use official online tools to verify recovery details and warned against scams involving fake emails and texts impersonating the agency.