State pensioners earning more than £35,000 a year are being warned they could face higher tax bills as HMRC begins clawing back Winter Fuel Payments.
The Government agency confirmed retirees who received the payment during the 2025/26 financial year but earned above the income threshold will see extra deductions taken directly from their pension or salary from April 2026.
Under current rules, pensioners with a total annual income of £35,000 or less can keep the payment in full.
Anyone earning above that amount will have the money reclaimed by HMRC through changes to their tax code.
The recovery process is expected to affect almost two million households across Britain, with HMRC adjusting tax codes so affected pensioners repay the money gradually over the course of the tax year.
For most pensioners, the repayment will be spread across monthly deductions.
HMRC said someone who received a typical £200 Winter Fuel Payment would pay around £17 extra in tax each month until the balance is cleared.
Officials said letters and email notifications started being issued from April 2026 to inform retirees their tax codes had changed. The deductions will appear as an “underpayment” on official HMRC documents.
The tax authority also confirmed higher-rate taxpayers could see different deductions depending on their income level and tax band. Scottish taxpayers may also face slightly different repayment amounts because of devolved tax rates.
HMRC said pensioners do not need to take any action immediately and cannot repay the money early as a lump sum.
Instead, the recovery will happen automatically through PAYE or Self Assessment systems.