State pensioners could lose their entire £200 to £300 Winter Fuel Payment if their income exceeds the £35,000 threshold by just 1p, money expert Martin Lewis has warned.
Winter Fuel Payments are automatically given to all state pensioners, regardless of income. However, for those earning over £35,000, the payment is reclaimed by HMRC through a tax code change or a self-assessment tax return, unless they opt out before winter.
What counts towards the threshold
Money received from the state pension counts towards the £35,000 threshold, along with private pension income, savings interest, work earnings, and any other qualifying income. Martin Lewis has explained that even going 1p over the threshold results in losing the entire payment.
Speaking on the Martin Lewis Podcast, he said: “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.”
Impact on pensioners
While some benefits like PIP, Pension Credit, and Disability Living Allowance do not count towards the threshold, receiving the full new state pension (post-2016) would leave just £22,452.40 of the £35,000 allowance. This means pensioners cannot earn another £22,453 or more in the same tax year without losing their entire payment.
Other earnings could come from a job, rental income, savings interest, or a private workplace pension or annuity. The threshold is much higher than the old Pension Credit rules, which removed the payment from those earning about £11,600 in 2024 before being changed.
Pensioners above the threshold will have the full amount collected via PAYE or self-assessment, with no need to register with HMRC. Those who wish to opt out can do so.
