HM Revenue and Customs (HMRC) is rolling out automatic new tax codes to around two million state pensioners due to a recent rule change by the Department for Work and Pensions (DWP). This update follows a policy shift that affects pensioners receiving Winter Fuel Payments or, for Scots, the Pension Age Winter Heating Payment.
Pensioners with a total annual income exceeding £35,000 will now face a clawback equal to the full value of these winter payments after the DWP’s reversal granted these payments to nine million retirees across the UK.
HMRC clarifies that for pensioners earning over £35,000, the recovery of these winter payments will be managed automatically through PAYE tax codes, unless they already file a Self Assessment tax return. This tax charge will apply across the entire UK following similar announcements from the Scottish Government and Northern Ireland Executive.
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For the 2026-2027 tax year, pensioners typically receiving a winter payment of £200 will see around £17 deducted monthly through PAYE. The following tax year, 2027-2028, deductions will temporarily increase to approximately £33 per month because HMRC will collect payments covering both 2026 and 2027 winters during this period. This adjustment facilitates a transition to in-year payment recovery consistent with standard PAYE procedures. From the 2028-2029 tax year onwards, monthly deductions will revert to roughly £17.
Pensioners can use an online calculator available on the GOV.UK website to check if their income exceeds the £35,000 threshold.
Those required to file a Self Assessment tax return will report and pay this charge through that process instead of PAYE. The changes take effect from the 2025-2026 tax year, meaning winter payments made in winter 2025 will be subject to this new tax charge.