HMRC will deduct £17 a month from state pensioners above the threshold.
HMRC is sending new tax codes to state pensioners (Image: Getty)
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, with charges starting at £17 a month if you miss tomorrow’s deadline to opt out.
Following changes made to the previous, unpopular winter fuel payment system which was tied to Pension Credit, winter fuel payments have since been made with the new £35,000 earnings threshold in place, which means most (but not all) state pensioners get to keep their £200 to £300 payments.
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 will 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.
Those who declined to opt out of the payment will see their circumstances during this week, September 21 to 27, used to determine how much they get this winter.
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 codes and send them a letter to tell them what their new tax code is, and recover the payment from their income each month, unless they had already opted out by Monday, September 21.
Those who are under 80, who would normally receive a £200 Winter Fuel Payment, will have £17 a month taken back from them by HMRC.
Its 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.”