Pensioners who continue working after reaching State Pension age are being urged to closely monitor their total income, as some could be required to repay their Winter Fuel Payment (WFP). Under government rules updated last year, pensioners with an annual income above £35,000 are no longer entitled to keep the payment in full. This is particularly relevant for older workers who have stayed in employment after turning 66, as earnings from work are added to other sources of taxable income, including the State Pension, potentially pushing some people above the £35,000 limit without realising it.
Income Threshold and Automatic Repayment
Many pensioners may assume they are comfortably below the threshold based on their salary alone. However, the WFP, typically £200 or £300 for those over 80, is still paid out automatically in November or December. If total individual income for the tax year exceeds £35,000 by even £1, the entire payment is clawed back. For example, a pensioner receiving the full State Pension, now worth £12,548 a year, and earning £24,000 from employment, would have a combined income of around £35,900, placing them above the WFP threshold.
Tax Implications for Working Pensioners
It is also important to remember that the State Pension itself is taxable, even though it is usually paid without tax being deducted. HMRC can recover any tax owed through a person's PAYE tax code if they are still working, or through other means if they are not. Experts have previously warned that some pensioners could unexpectedly face tax bills if they do not account for the State Pension when calculating their total annual income. As State Pension payments continue to rise under the triple lock, more retirees may find themselves edging closer to tax thresholds and benefit limits.
Government U-Turn on Winter Fuel Payment
The WFP is a tax-free government grant given to eligible pensioner households to help pay for heating costs over the winter months. The scheme had previously given up to £300 each winter to all households with someone at state pension age. However, in winter 2024/25, it was restricted to those on Pension Credit or certain other benefits. In 2025, the government confirmed the WFP would be reinstated for all pensioners from winter 2025/26, though those earning over £35,000 a year will have the payment reclaimed automatically, unless they opt out.
Action Required for Pensioners
Anyone working beyond the age of 66 should therefore check their overall taxable income, rather than just their wages, to establish whether they could lose eligibility for the WFP and be required to repay it. This follows a major U-turn from Labour on the policy.
