HMRC has confirmed a change to the way it recovers Winter Fuel Payments, and Pension Age Winter Heating Payments in Scotland, from higher-income recipients. Some taxpayers will now see deductions through their tax code earlier than originally planned.
If you or a family member receive the Winter Fuel Payment and have income above £35,000, it’s worth understanding how and when this will affect your take-home pay.
Who is affected?
Winter Fuel Payments are means-tested by individual income, not household income. This means that where two people in the same household both receive a payment, each person’s entitlement is assessed based on their own income.
Anyone with income of £35,000 or less will keep their payment in full; no repayment is required. It’s only those above this threshold who need to be aware of the recovery process.
What’s changed with Winter Fuel Payment recovery?
HMRC had originally planned to begin collecting these payments in-year from April 2027, alongside amounts paid in 2025/26. Under the revised timetable, some PAYE taxpayers may now see deductions start earlier, from January 2027, as tax codes are adjusted ahead of the 2027/28 tax year.
Two payments could be collected together:
From April 2027, HMRC intends to recover Winter Fuel Payments through PAYE in the same tax year they are paid, rather than the year after. As a transitional step, this means some taxpayers could see two years of payments recovered within a similar period:
- Payments received in November or December 2026 may be collected through the tax code from January 2027.
- At the same time, payments due for 2026/27 will also begin to be collected via PAYE for the remainder of that tax year.
For example: someone who received £200 in 2025/26 and a further £200 in 2026/27 could see their monthly tax bill rise by roughly £30 to £33 during the period when both payments are being recovered from January 2027 onwards.
HMRC has confirmed that no one will repay more than the value of the payments they actually received. The exact amount depends on individual circumstances and whether the recipient lives in Scotland or elsewhere in the UK.
From April 2028, the position should settle down, with most taxpayers only having one year’s payment collected through their tax code at a time; equivalent to around £17 extra tax per month for a £200 payment. Anyone receiving the payment for the first time will still experience a period of double recovery, starting from the January following their first payment.
Do you need to do anything?
For most PAYE taxpayers, no action is required. HMRC will adjust tax codes automatically to collect the amount due, and there’s no need to contact them directly.
If you complete a Self-Assessment tax return and your income exceeds £35,000, the Winter Fuel Payment should be included on your return for the year in which it was received. HMRC expects this to be pre-populated for most people filing online, but it remains important to check the figure carefully and correct it if necessary.
Opting out of Winter Fuel Payments:
Taxpayers can choose not to receive future Winter Fuel Payments if they would prefer to avoid the tax code adjustment altogether. The deadlines differ depending on where you live:
- England, Wales and Northern Ireland: contact the DWP by 20th September to opt out for that year.
- Scotland: use the online service by 19th October, or contact Social Security Scotland before the payment is issued.
Further guidance is available on GOV.UK and mygov.scot for those wanting to explore this option.
A note for those in Making Tax Digital:
Taxpayers participating in Making Tax Digital testing for 2025/26 should note that there is currently no facility within the MTD return to enter the Winter Fuel Payment or Pension Age Winter Heating Payment recovery.
Instead, HMRC will calculate the charge separately and write to affected taxpayers with the amount due. Payment should be made in the usual way, and HMRC has confirmed that no late payment penalties or interest will apply where these separately calculated amounts are not received by the normal payment dates. From 2026/27 onwards, the charge will be built into the MTD return itself.
In conclusion:
These transitional arrangements mean that some higher-income taxpayers could see a noticeable, if temporary, dip in their take-home pay from January 2027 as two years’ worth of payments are recovered together.
Understanding whether this applies to you, and planning your cash flow accordingly, is worth doing in advance.
Contact our team on 01905 777600 or email hello@ormerodrutter.co.uk for more information.
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This article is correct as at the date of publication and is intended for general guidance only. It does not constitute tax advice and should not be relied upon as such. Tax rules and HMRC guidance can change, and individual circumstances vary. If you would like advice specific to your situation, please contact us and a member of our team will be happy to help.
