Chancellor Rachel Reeves has confirmed that around three million state pensioners will see their payments reduced under new rules, with HMRC deducting Winter Fuel Payments from those judged financially comfortable.
New income threshold for Winter Fuel Payments
The threshold for keeping the winter allowance is now £35,000. Pensioners with annual incomes above this level will have the payment reclaimed by HMRC through monthly instalments. Under the new system, all pensioners initially receive the money in November, but deductions apply for those earning over the threshold.
The winter fuel allowance is worth either £200 or £300. For those receiving £200 payments, deductions will be £17 per month in the 2026/27 tax year, rising to £33 per month in 2027/28. The majority of pensioners—around nine million—will still keep the payment.
Government explanation and impact
The Government explained: "If your total income is over £35,000, you'll need to pay back the payment. HMRC will automatically collect the payment through your tax code unless you already file self-assessment tax returns. This means we'll change your tax code for the 2026 to 2027 tax year. For a typical payment of £200, we'll deduct approximately £17 per month. In the 2027 to 2028 tax year, we'll deduct approximately £33 per month for a typical payment of £200. This is because we'll be collecting your payments from 2026 and 2027. It will then return to approximately £17 per month for the 2028 to 2029 tax year."
Over-65s affected will need to bear in mind that their regular payments will be lower than expected. The changes are due to latest qualifying rules for Winter Fuel Payments, confirmed by Chancellor Rachel Reeves.
