HMRC update on rules for pensioners who must pay £300 winter fuel back

Millions of pensioners will receive their £300 Winter Fuel Payment this month. Government will send between £100 and £300 to all pensioners born before September 22, 1959, during November and December, whether they are under the £35,000 threshold limit or not.

However, an estimated two million retirees' income exceeds £35,000, including their earnings, pensions, savings interest and taxable state benefits, meaning they must return the money. The deadline to opt out has already passed, so all pensioners who have not yet done so will receive the payment automatically.

While some pensioners would prefer to send the money back immediately, rather than pay it back in instalments, HMRC confirmed it will recover the money through tax, and Winter Fuel Payment cannot be paid back any sooner.

HMRC will either extract the money monthly through the PAYE system, which will be the case for the majority of impacted pensioners, or through a Self Assessment tax return.

For state pensioners already on the PAYE system, HMRC will change the tax code for the 2026/2027 tax year, so the money will be taken automatically from retirees' incomes from April 2026.

To put it into monthly terms, a pensioner who has to pay back a Winter Fuel Payment worth £200 would see around £17 deducted every month.

For pensioners who normally submit a Self Assessment tax return online, the payment should have been automatically added to their 2025/2026 return, which is due by January 31, 2027. If it is not already included, pensioners should add it themselves.

People who file a paper Self Assessment tax return will need to include the payment amount in their 2025/2026 tax return, which is due by October 31, 2026.

Until 2024, households with someone over the female state pension age could receive a winter fuel payment (WFP) worth £200 each year, or £300 for households with a member over age 80. All pensioners were eligible, regardless of their income or assets.

Last July, the government announced that eligibility would be restricted to those on low incomes who received benefits such as Pension Credit (PC).

However, after intense backlash, Labour made a U-turn and reinstated the support for all pensioners who earn less than £35,000.