How your savings interest could rob you of your winter fuel allowance: JEFF

The Government’s U-turn on winter fuel payments means nine million pensioners in England and Wales will now get a £200 or £300 top-up in time for Christmas. 

But the rules governing who gets it, only to have it clawed back in tax, are rather baffling to say the least.

In the past ten days, hundreds of readers have contacted Money Mail asking whether they will be a winter fuel payment winner or loser.

‘To say the changes are not well thought out is an understatement,’ says 68-year-old retired engineer Brian Springthorpe, from near Conwy in North Wales. ‘They still penalise pensioners who are scraping by.’

Having been deprived of the winter fuel payment last year by the Chancellor’s decision to axe it for all pensioners bar those in receipt of pension credit, Brian and his wife Janet will now receive £200 of it in time for Christmas this year.

But Brian’s income will result in him having to give back his £100 share of the payment in tax. ‘Preposterous!’ he adds. It’s a view shared by many readers.

Confusing rules: Rachel Reeves reinstated winter fuel payments – but will yours be snatched back?

Here, we spell out the key things you need to understand in order to ascertain whether or not the payment coming your way will be grabbed back – as will be the case for Brian.

How the payment will now work

This tax year – ending April 5, 2026 – the Government has decided to pay all households with a state pensioner born on or before September 21, 1959, a winter fuel payment.

The amount will either be £200 or £300, with the higher payment made to households where there is a pensioner aged 80 or over on September 21 this year. 

The key is that the payment is household-based. If a pensioner aged 70 lives on their own, they will get the same £200 payment as a pensioner couple who live next door and are of the same age – or a couple where only one of them has reached pensionable age.

In terms of who gets the money, £200 is paid to the first person in the household who reaches state pension age. When the second householder hits pension age, the payment is then split 50:50.

When the first pensioner passes the age of 80, they get an extra £100, taking the combined household payment to £300. When both are aged 80-plus, each gets £150.

The only exception is where a couple are in receipt of pension credit. Here the payment – £200 or £300 – is made in one lump sum.

How will it be taken away?

Although all pensioners will receive a winter fuel payment, not all of them will cling on to it, as Brian Springthorpe has discovered. 

Some two million pensioners – not pensioner households – who have taxable income this tax year in excess of £35,000 will have to give back their share of the winter fuel payment, either through Pay As You Earn or through self-assessment.

For pensioners living alone, that will mean handing back either £200 or £300, depending on whether they are under or over 80.

For pensioner couples, it’s more complex. How much they will give back is determined by their individual ages and the age of those with £35,000-plus of taxable income.

For a household where a couple are both of state pension age, but below age 80, they will initially receive £100 each in winter fuel payment. 

But if one of them has a taxable income above £35,000, they will have the £100 clawed back from them through the tax system.

If both have taxable incomes above £35,000, they will each have to pay back £100.

A household where a couple are both 80 or over will initially get a £300 payment. But if one of them has taxable income in excess of the £35,000 threshold, he or she will lose their £150 share. If both have incomes above £35,000, they will each lose their £150.

For a household where a married couple are both of state pension age but one is above the age of 80, they will start with a £300 payment. 

If the older pensioner has taxable income in excess of £35,000, they will lose £200 while their partner keeps £100.

If it’s the younger pensioner with more than £35,000 of taxable income, they will lose their £100 share.

Penalised: Brian Springthorpe, pictured with wife Janet, will get his £100 winter fuel payment share – then lose it again

The definition of taxable income 

Lots of readers have raised queries about the £35,000 taxable income threshold.

For a start, the threshold includes your personal allowance of £12,570; it is not on top of it.

It also embraces your state pension which is taxable and any income or withdrawals from a private pension (a works scheme or one you have set up yourself such as a self-invested personal pension). Any withdrawal of tax-free cash from a pension is excluded.

All interest from savings accounts is taken into account irrespective of whether it is below the…