State pensioners earning just £22,453 on top of their full new state pension will lose their winter fuel payment of £200, according to HMRC rules. The threshold for losing the payment is £35,000 total income, and the full new state pension of £12,547.60 counts toward that limit, leaving only £22,452.40 before the cliff edge.
New Rules Replace Old Pension Credit System
The unpopular Pension Credit eligibility rules introduced two years ago have been scrapped. This coming winter will be the second time the new universal winter fuel payment system for all state pensioners is in place. Under the newer rules, those earning more than £35,000 will automatically lose their winter fuel payment, as the money will be taken back through tax.
Martin Lewis Explains the Cliff Edge
Money expert Martin Lewis set out what counts toward the £35,000 threshold. He stressed that state pension income does count, and you lose the entire winter fuel payment if you go even 1p over the threshold. Speaking on the Martin Lewis Podcast, he explained: "This is a cliff edge. If you earn £35,000 and 1p, you lose the entire £200. It is not a graduated scheme, it’s a cliff edge scheme, it’s all or nothing."
He added: "It is all of your earnings that are subject to Income Tax. That is any private pension, any state pension income, any employment income, any savings interest outside of an ISA."
What Income Counts and What Doesn't
Income that counts toward the threshold includes state pension, private pension, employment income, rental income, savings interest, and annuities. Benefits that do not count include Personal Independence Payment (PIP), Pension Credit, and Disability Living Allowance. For a pensioner on the full new state pension, collecting that leaves £22,452.40 of the £35,000 threshold. Earning another £22,453 or more in the same tax year would push them over the cliff edge and cause them to lose the entire £200 winter fuel payment.
How the Payment Is Recovered
Pensioners above the £35,000 threshold will have the full amount of the winter fuel payment they received automatically collected via PAYE or their Self-Assessment return. No one needs to register with HMRC for this or take any further action. Pensioners who want to opt out and not receive the payment at all will be able to do so. The threshold is much higher than the old Pension Credit rules, which removed the winter fuel payment from those earning about £11,600 for one year in 2024 before it was changed again.
