HMRC warning as pensioners face £17 monthly tax hit after Labour rule change

HMRC began recovering the money in April 2026 by changing tax codes

Millions of pensioners are seeing less money in their monthly income after receiving help with their heating costs last winter.

Some are losing around £17 a month as HMRC automatically claws back their Winter Fuel Payment following a change to the rules.

Pensioners who received a Winter Fuel Payment for 2025/26 but have personal income above £35,000 must repay it in full.

HMRC began recovering the money in April 2026 by changing tax codes, affecting almost two million households during the 2026/27 tax year. Those using Self Assessment will repay it through their tax return.

Payments range from £100 to £300 depending on age and circumstances, meaning monthly deductions will vary. Pensioners cannot repay the money early as a lump sum.

The Government had restricted the support to people receiving certain means-tested benefits in September 2024, but expanded it following widespread criticism.

Under rules confirmed in June 2025, around nine million pensioners can receive the payment automatically, but those earning more than £35,000 must repay it unless they opted out beforehand.

How the £17 monthly deduction works

HMRC has provided an example involving a basic-rate taxpayer with a total annual income of £37,710.

The pensioner receives £25,737 from a private pension and £11,973 from the State Pension, while also receiving a £200 Winter Fuel Payment in December.

HMRC subtracts the £11,973 State Pension and a further £1,000 adjustment from the pensioner's £12,570 Personal Allowance.

This creates a negative tax-free allowance of £403, resulting in a K39 tax code after HMRC's coding adjustments and rounding.

For a basic-rate taxpayer, reducing the allowance by £1,000 produces £200 of additional tax over the year, allowing HMRC to recover the £200 Winter Fuel Payment. This works out at approximately £17 a month.

What Self Assessment taxpayers must do

People completing an online Self Assessment return should find the Winter Fuel Payment automatically included in their 2025/26 tax return.

The deadline for submitting the online return is 31 January 2027.

Those using a paper return face an earlier deadline of 31 October 2026 and must add the payment themselves if it is not already shown.

Pensioners warned about scams

The automatic recovery applies throughout the UK, including Scotland and Northern Ireland.

In Scotland, the support is called the Pension Age Winter Heating Payment. In Northern Ireland, the Department for Work and Pensions issued payments on behalf of the Northern Ireland Executive.

HMRC is responsible for recovering the money across every part of the UK.

The tax authority has also warned pensioners to be alert to scammers, stressing that it will never request repayment or bank details by text message or email.

Myrtle Lloyd, HMRC's chief customer officer, said: "Criminals are great pretenders and often use fake letters, emails, calls and texts to impersonate HMRC and trick people into giving them money."

Mrs Lloyd encouraged anyone who is unsure whether a message is genuine to check it using the official online tool on GOV.UK rather than calling a number included in the communication.