The Labour government, led by Andy Burnham alongside Chancellor John Healey, has announced plans to recoup £300 from state pensioners who receive the Winter Fuel Payment but have incomes exceeding £35,000 per year.
From November onwards, the Winter Fuel Payment will continue to be paid automatically to individuals aged 66 and over to help with heating costs. However, a new income threshold means that those earning above £35,000 annually will no longer be eligible to keep the payment in full. Instead, HM Revenue and Customs (HMRC) will recover these funds through adjustments to recipients' tax codes.
For state pensioners affected, this will result in monthly tax deductions of approximately £33 as HMRC recovers overpaid support. Beginning in 2027, HMRC plans to collect two payments within the same year: one recouping the overpayment from 2026, and another in advance for the 2027 payment. This combined approach could lead to deductions totalling up to £600 over the course of the year.
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HMRC clarified the details: “For PAYE customers, a typical Winter Fuel Payment of £200 currently results in deductions of about £17 per month. However, in the 2027 to 2028 tax year, this will increase to approximately £33 per month due to the collection of payments from both 2026 and 2027. In the following tax year, 2028 to 2029, deductions will revert to around £17 per month.”
Pensioners who are certain that their income will exceed the £35,000 threshold have the option to opt out of receiving the 2026 Winter Fuel Payment. HMRC will provide details on how to opt out starting 1 April 2026, including options to do so online at gov.uk or mygov.scot, by phone, or by post.
A spokesperson for HMRC added: “Unless recipients opt out, we will recover payments for the two tax years by adjusting their tax code in the 2027 to 2028 tax year. For example, if someone receives £200 each tax year, we will deduct about £33 extra each month during that tax year. From 2028 to 2029 onwards, payments will be collected through similar tax code adjustments in the relevant tax year.”
These measures are part of the government’s efforts to ensure Winter Fuel Payments are targeted appropriately, supporting pensioners with heating costs without providing automatic entitlement to higher earners.