State pensioners earning just £22,453 will lose their winter fuel payment of £200, according to new HMRC rules. The unpopular Pension Credit eligibility rules introduced last year have been scrapped and will be replaced this coming winter by a new universal winter fuel payment for all state pensioners.
The key change is that those earning more than £35,000 will automatically lose their winter fuel payment again, as the cash will be taken back through tax. Money received from the state pension counts toward the £35,000 threshold.
For a state pensioner on the new full state pension, that means already earning £12,547.60 a year toward the threshold just by collecting the state pension each week, assuming a full National Insurance record maximises payments.
Martin Lewis Explains the Cliff Edge
Money expert Martin Lewis revealed what counts toward the £35,000 threshold for winter fuel payment eligibility under the new rules. He stressed that state pension income does count, and you will lose the entire winter fuel payment if you go even 1p over the threshold.
Speaking on the latest 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. 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."
While benefits such as Personal Independence Payment (PIP), Pension Credit, and Disability Living Allowance do not count toward the threshold, collecting the full state pension leaves you with just £22,452.40 of your £35,000 allowance. This means you cannot earn another £22,453 or more in the same tax year without going over the cliff edge and losing your entire winter fuel payment.
Other earnings that count include income from a job, rental income, savings interest, or a private workplace pension or annuity.
Higher Threshold Compared to Previous Rules
The new 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.
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 will need 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.
