Winter Fuel Payment - To be or Not to be?

ElectricBeagle

Winter Fuel Payment Entitlement

Good morning and thank you in advance for your time.  I have three  questions that relate to “income” and the Winter fuel payment for 2025/26. 

I manage my Mothers finances for her as she is disabled and I am of the belief that she is not entitled to the Winter Fuel payment. I want to be sure of the situation to avoid any situations down the road where the state says you received something which you weren’t entitled to (even though we didn’t ask to be paid it).  I also want to be certain before opting her out of the facts.

On checking on the tax.service.gov website and answering their questions, it suggests that, she is entitled to the Winter Fuel payment. Mum has two (or three) sources of income. She receives a weekly 1. pension from the state and also receives 2. PIP benefit 13 months of year. These are her two external “state” sources of income. Mum used to received pension credit top up but upon receiving an inheritance sum that exceeded the £16,000 threshold at the time to be eligible to receive pension credit, we reported this change in circumstances and requested it stopped.  Her Pension Credit was immediately stopped along with any and all related benefits as should be the case. She also filled a tax return that year but then also notified HMRC that she would not be filing any future tax returns as she lives off savings (the lump sum) and her state pension and PIP incomes. She is not part of the PAYE system so there is nothing to automatically register income other than sending bank statements.  No problems so far. 

*I mention the PAYE system as there is discussion of the state clawing back the WFP through that system for those ineligible, as Mum isn’t part of it. It’s a little concerning the state just blanket paying people and then dipping into their bank accounts as what’s when it pleases even when that individual hasn’t asked for the payment.

Anyway, this lump sum in her bank account exceeding £16,000 which she paid Inheritance tax on several years ago, does earn some pocket change interest but it is less the £5 a year and therefore although taxable, is covered by her personal allowance. In place of the Pension Credit she lost, she pays herself the exact equivalent amount from that inherited lump sum that she already paid tax on. This is her third internal source of income as we see it as it replaces the Pension credit she lost. Due to her having more than £16,000 in her bank account and the loss of her pension credit, we expected to not receive the winter fuel payment for the past couple of years and this wasn’t received as expected. 

Now, out of the blue, she has received a letter stating she will receive the WFP this winter. My questions are related to what the DWP and HMRC view as her “income” or “income sources” and if she did have in the past and is current.y entitled to the WFP.

1. Is this third source of income (as we see it) that replaces her pension credit that is paid from her savings, actually viewed by the DWP and HMRC as “income”?  Again, it earns less than £5 interest a year and is paid from a source that has already been taxed. * (yes she could earn more interest but thats for another discussion). 
2. Is she entitled to the Winter Fuel payment?  She was born before, the eligible 1st September 1959 date and was living in the country in the required week, but still has more than £16,000 worth of savings in her bank account (argument for “No”).  Separately, her annual income , whether you use only the two state sources, or if you include the third savings source, is still less than £35,000 on both counts.  HMRC’s website seems to argue that in favour of “Yes” argument.
3. Now I am confused as to whether the defining limitation to receive the winter fuel payment is having less than £16,000 or less than £35,000. Which is it or is it something completely different. 

These questions are asked purely from the legal and tax context and not the moral context. We both feel she doesn’t want to receive it and are also aware she can opt out of receiving it.  We just want to know the facts based on her situation. Thank you in advance for your thoughts, advice and comments.

itsthelittlethings

I think they’ve changed it, instead of it only going to people on pension credit it now goes to everyone with an income of less than £35,000 a year. In fact, it’s paid to everyone unless they opt out and retrieved through taxation if the income is too much.

Dazed_and_C0nfused

ElectricBeagle said:

Winter Fuel Payment Entitlement

Good morning and thank you in advance for your time.  I have three  questions that relate to “income” and the Winter fuel payment for 2025/26. 

I manage my Mothers finances for her as she is disabled and I am of the belief that she is not entitled to the Winter Fuel payment. I want to be sure of the situation to avoid any situations down the road where the state says you received something which you weren’t entitled to (even though we didn’t ask to be paid it).  I also want to be certain before opting her out of the facts.

On checking on the tax.service.gov website and answering their questions, it suggests that, she is entitled to the Winter Fuel payment. Mum has two (or three) sources of income. She receives a weekly 1. pension from the state and also receives 2. PIP benefit 13 months of year. These are her two external “state” sources of income. Mum used to received pension credit top up but upon receiving an inheritance sum that exceeded the £16,000 threshold at the time to be eligible to receive pension credit, we reported this change in circumstances and requested it stopped.  Her Pension Credit was immediately stopped along with any and all related benefits as should be the case. She also filled a tax return that year but then also notified HMRC that she would not be filing any future tax returns as she lives off savings (the lump sum) and her state pension and PIP incomes. She is not part of the PAYE system so there is nothing to automatically register income other than sending bank statements.  No problems so far. 

*I mention the PAYE system as there is discussion of the state clawing back the WFP through that system for those ineligible, as Mum isn’t part of it. It’s a little concerning the state just blanket paying people and then dipping into their bank accounts as what’s when it pleases even when that individual hasn’t asked for the payment.

Anyway, this lump sum in her bank account exceeding £16,000 which she paid Inheritance tax on several years ago, does earn some pocket change interest but it is less the £5 a year and therefore although taxable, is covered by her personal allowance. In place of the Pension Credit she lost, she pays herself the exact equivalent amount from that inherited lump sum that she already paid tax on. This is her third internal source of income as we see it as it replaces the Pension credit she lost. Due to her having more than £16,000 in her bank account and the loss of her pension credit, we expected to not receive the winter fuel payment for the past couple of years and this wasn’t received as expected. 

Now, out of the blue, she has received a letter stating she will receive the WFP this winter. My questions are related to what the DWP and HMRC view as her “income” or “income sources” and if she did have in the past and is current.y entitled to the WFP.

1. Is this third source of income (as we see it) that replaces her pension credit that is paid from her savings, actually viewed by the DWP and HMRC as “income”?  Again, it earns less than £5 interest a year and is paid from a source that has already been taxed. * (yes she could earn more interest but thats for another discussion). 
2. Is she entitled to the Winter Fuel payment?  She was born before, the eligible 1st September 1959 date and was living in the country in the required week, but still has more than £16,000 worth of savings in her bank account (argument for “No”).  Separately, her annual income , whether you use only the two state sources, or if you include the third savings source, is still less than £35,000 on both counts.  HMRC’s website seems to argue that in favour of “Yes” argument.
3. Now I am confused as to whether the defining limitation to receive the winter fuel payment is having less than £16,000 or less than £35,000. Which is it or is it something completely different. 

These questions are asked purely from the legal and tax context and not the moral context. We both feel she doesn’t want to receive it and are also aware she can opt out of receiving it.  We just want to know the facts based on her situation. Thank you in advance for your thoughts, advice and comments.

You are massively overcomplicating things.

DWP are paying it to everyone who is entitled to it (and haven't opted out).  Having a lot of income (or capital) doesn't stop you being eligible for it.

But if her taxable income is more than £35,000 she would have to pay it back, via the tax system.

PIP is not taxable income so you ignore that.

Having capital is not relevant so ignore that.

Taxable interest earned from that capital is relevant. 

Tax exempt interest from a Cash ISA is not relevant.

She has missed the boat for being able to opt out, where have you read anything to suggest that she can opt out?

But irrespective of that nothing you have posted suggests she would need to pay it back anyway.  Unless she has the biggest State Pension in the country!  Or more interest than you have mentioned.

It isn't clear why she filed a tax return, what income did she include on that 🤔

ElectricBeagle

Good morning.

She received the letter last week stating she would received the WFP. I promptly checked to see if it was correct using forums and government websites which advised me you could opt out. It seems incompetent of the state to offer you the ability to opt out if the letter is received passed the opt out deadline.

She filed a tax return as she was required to do so by UK law and as advised by two tax accountants based on her specific circumstances.

She receives less than the state weekly Full pension, which is why she used to receive Pension Credit top up. Interest on all her money in her bank accounts is less than £5 a year. 

Thanks for the reply

Dazed_and_C0nfused

ElectricBeagle said:

Good morning.

She received the letter last week stating she would received the WFP. I promptly checked to see if it was correct using forums and government websites which advised me you could opt out. It seems incompetent of the state to offer you the ability to opt out if the letter is received passed the opt out deadline.

She filed a tax return as she was required to do so by UK law and as advised by two tax accountants based on her specific circumstances.

She receives less than the state weekly Full pension, which is why she used to receive Pension Credit top up. Interest on all her money in her bank accounts is less than £5 a year. 

Thanks for the reply

Have you not checked the official information?

https://www.gov.uk/winter-fuel-payment/report-change-circumstances

What you have said about a tax return makes no sense whatsoever.  You do not need to file a tax return if your only (taxable) income is State Pension and small amounts of interest.  That is still true even if you needed to pay tax on the State Pension.

There is clearly more to this than you are telling us but, from what you have disclosed in the paragraph highlighted in bold, she will not be required to pay the Winter Fuel Payment back.

ElectricBeagle

No, those are the facts and nothing more. “You do not need to file a tax return if your only (taxable) income is State Pension and small amounts of interest” yes that’s correct… but I stated she was advised to do so by two tax accountants (because I’m not a tax accountant) based on her specific circumstances. I offered the information in the post to paint a clear picture and avoid people guessing, assuming or creating fantasy.  The post and its questions relate to the WFP and whether savings are considered income (but not the interest earned on those savings). But don’t distract away from the three questions asked. 

1. Are the savings she partially lives off (that she doesn’t need to pay tax on the interest earned as it’s less than her personal allowance ) considered “Income” from the perspective of HMRC or the DWP?

2. Is she entitled to the WFP? “Yes” she is according to you.

3. Is the threshold £16,000 or £35,000 or something else? The answer would appear to be “the threshold has changed to £35,000 a year.

Dazed_and_C0nfused

1.  DWP have no interest in what her income is, it's not something that is a relevant factor for them.  HMRC will include (taxable) interest when checking if her income is more than £35,000.

2.  Most English & Welsh residents of State Pension pension are entitled to it.

You will not be eligible if you:

•live outside England and Wales

•were in hospital getting free treatment for the whole of the week of 15 to 21 September 2025 and the year before that

•need permission to enter the UK and your granted leave says that you cannot claim public funds

•were in prison for the whole of the week of 15 to 21 September 2025

3.  The £16,000 you are referring to relates to a different concept to the £35,000.

ElectricBeagle

Ok. Thank you.

Spoonie_Turtle

The £35,000 threshold relevant for WFP is taxable income.  PIP and the money she pays herself from her savings are not taxable income.

The threshold at which savings start being taken into account for Pension Credit is £10,000 not £16,000.  But it's not a threshold for eligibility, it's where deductions start being taken (£1/wk per £500 out offset thereof above 10k).
[16k I think is relevant for Housing Benefit and Council Tax Support when someone is not entitled to PC, but I'm not 100% certain there.]

Does she live alone?  As she receives PIP her Pension Credit threshold for support would be higher than someone not claiming a disability benefit if she does live alone.

I'm just wondering whether it's worth checking with an eligibility calculator say, once a year or so, just to check she's not missing out on being entitled to Pension Credit again.

ElectricBeagle

Hi Spoonie-Turtle. Thanks for replying and Good afternoon. Yes, you’re 100% correct concerning the Pension Credit amounts. I only put the £16,000 figure, as at the time that was the limit to receive the benefit at all after you take one pound off for every certain amount you have saved. 

That’s great to know about the PIP and Savings she pays herself being “not taxable income”. 

Yes, very true. It is worth checking annually the eligibility calculator. I didn’t occur to me that the threshold would change. It is also a challenge in that the threshold for Pension Credit that disqualified her for the Winter Fuel payment (at that time) is different to the new £35,000 income threshold that does make her eligible to receive it. So now, she is not eligible to receive PC but is entitled to receive the WFP, which she was not entitled to two years ago. 

As a general rule, and only considering Tax and Benefits, if asked “What is you annual income?”, and she receives and pays Herself from savings the following, what would the answer be?

Rough example: 
State Pension: £8000 a year.
PIP: £7500 a year 
Savings: £8000 a year (this she pays herself from savings and is exactly the equivalent of the Pension Credit she lost.

On the above example, and only for tax and benefits purposes, what should she say her income is?

itsthelittlethings

ElectricBeagle said:

Hi Spoonie-Turtle. Thanks for replying and Good afternoon. Yes, you’re 100% correct concerning the Pension Credit amounts. I only put the £16,000 figure, as at the time that was the limit to receive the benefit at all after you take one pound off for every certain amount you have saved. 

That’s great to know about the PIP and Savings she pays herself being “not taxable income”. 

Yes, very true. It is worth checking annually the eligibility calculator. I didn’t occur to me that the threshold would change. It is also a challenge in that the threshold for Pension Credit that disqualified her for the Winter Fuel payment (at that time) is different to the new £35,000 income threshold that does make her eligible to receive it. So now, she is not eligible to receive PC but is entitled to receive the WFP, which she was not entitled to two years ago. 

As a general rule, and only considering Tax and Benefits, if asked “What is you annual income?”, and she receives and pays Herself from savings the following, what would the answer be?

Rough example: 
State Pension: £8000 a year.
PIP: £7500 a year 
Savings: £8000 a year (this she pays herself from savings and is exactly the equivalent of the Pension Credit she lost.

On the above example, and only for tax and benefits purposes, what should she say her income is?

£8000 plus any interest from savings.