Some State Pensioners may need to take a closer look at their income before counting on keeping their full Winter Fuel Payment.
The payment is intended to help older people with the cost of heating their homes during the colder months. But for pensioners with higher incomes, there is a rule that could mean the money is later recovered through the tax system.
The figure to keep in mind is £35,000.
Why £35,000 matters
The £35,000 threshold relates to a pensioner’s taxable income.
If your income goes above this level, you may still receive your Winter Fuel Payment, but HM Revenue and Customs (HMRC) can recover the amount through the tax system.
This means the payment may arrive in your bank account as expected, only for the money to be taken back later through your tax arrangements.
For pensioners who carefully budget their money from month to month, that is something worth knowing about in advance.
It isn’t just your State Pension
One common mistake is to look only at the amount received from the State Pension.
Your total taxable income can include money from other sources too. For example, you may also receive payments from a private pension or workplace pension, have earnings from a job, or receive other taxable income.
When these amounts are added together, someone who does not consider themselves a particularly high earner could find that their income is above the £35,000 threshold.
That’s why checking the full picture is important.
Couples should check their own income
Pensioner couples also need to be aware that the threshold applies to individuals.
In other words, you should not simply combine both partners’ incomes and assume that the couple will automatically be affected.
One partner could have taxable income above £35,000 while the other remains below the threshold.
Their individual circumstances will therefore need to be considered separately.
Could you lose the payment completely?
Not necessarily.
Going over the £35,000 income level does not simply mean that the Winter Fuel Payment will be refused.
Instead, the payment can be recovered through the tax system. How this happens will depend on the individual’s tax circumstances.
For someone whose income is close to the threshold, it is therefore worth checking the figures rather than making assumptions.
What should pensioners do?
If you receive the State Pension as well as a private or workplace pension, it may be worth checking your expected taxable income for the relevant tax year.
Don’t forget to include other taxable income where applicable.
If you’re unsure whether the rules apply to you, getting advice from HMRC or an independent benefits adviser can help you understand your position before making financial plans around the Winter Fuel Payment.
The bottom line
The £35,000 rule is particularly important for pensioners who have more than one source of income.
Receiving the Winter Fuel Payment does not necessarily mean you will be able to keep the money if your taxable income is above the relevant threshold.
With winter energy costs putting pressure on household budgets, knowing where you stand could prevent an unpleasant surprise later on.
