HMRC says 'we will change tax codes' over Winter Fuel Payment

State pensioners may find they are moved onto a different tax code as part of new Winter Fuel Payment rules.

DWP ministers have set out new qualifying rules for the state pension-age payment. The cash previously went out to people who were on a qualifying means-tested benefit, such as Pension Credit.

But now this is being expanded so most people of state pension age will qualify, while those with an income above £35,000 will have to pay back the amount. Last winter's payment was worth £200 or £300.

HMRC was asked for more details about how it will recover the funds from those over the income limit. The group said: "Winter Fuel Payments will be paid automatically without a claim, and any charges will be collected via PAYE, or via self-assessment for those with other income to declare. We’ll be providing further details in due course."

For those paying back the cash through PAYE, this will involve a change in your tax code. HMRC explained: "We will automatically amend customers' PAYE tax codes for them, and we will provide further details in due course. Customers can check their taxable income quickly and easily in the HMRC app or online."

You can find your tax code for the current tax year through your personal tax account, on the HMRC app, on your payslip or on a 'tax code notice' letter from HMRC if you receive one.

HMRC confirmed that no one will need to register for self-assessment as a result of the new rules in order to pay back the amount.

Asked if there will be any deadlines to repay the amount, HMRC said: "For the majority of customers, recovery will take place automatically via PAYE and they need take no action.

"Customers who have other income that they report via a self-assessment form will need to file their tax return and pay their overall liability in the normal way."

Pensioners adding up their income to work out if they will need to repay the amount may want to take note of a HMRC rule they may not realise could affect this.

Jeremy Cox, head of Strategy at Coventry Building Society, said: "Thousands could still unknowingly be left out in the cold - not because they’re earning more, but because their savings are.

"Many pensioners may not realise that interest earned on savings held outside of ISAs count towards their total taxable income."

He warned that given interest rates are still relatively high, even if you have relatively small savings you could be earning enough interest to move you over the threshold.

Fo example, someone with £20,000 in a savings account earning 4.5.% would accrue £900 in interest a year which would count towards their taxable income and so would contribute towards the £35,000 limit to keep the payment.

One option if you are in danger of crossing the threshold due to your savings growth is to move your savings into a tax-free ISA, as any interest earnings or investment growth within the account is entirely tax-free, and so will not count towards the income limit.