Rachel Reeves posted this on Twitter this lunchtime:
This means 70% of all pensioners are going to have the winter fuel allowance restored after not having it for one year.
30% will miss out.
How is she going to find out who they are?
Given the complexity of many taxpayers' affairs, there is no way she can do this from online tax filing, so what will the cost of excluding those not qualifying be?
My suggestion is that it will be much more than the cost of paying the allowance to 100% of pensioners.
And if a form is required, millions who deserve the payment will lose out.
Labour really is determined to get everything wrong.
Update:
I now gather that excess payments to those with total income above £35,000 will be collected via tax returns.
This creates a totally new tax threshold.
It might also require millions more pensioners to complete tax returns.
In turn, it will create vast amounts of extra work for HMRC and considerable need for additional correspondence.
And, of course, all those who get this wrong could be fined.
If you wanted to create mayhem for a £200 allowance for 3.9 million people, you could not do it more effectively than this.
What a mess.
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If they really do need to save a bit, (which I’m not sure I believe given the way the benefit must surely circulate strongly within the economy and get taxed along the way) wouldn’t it be more straightforward to make the benefit subject to income tax?
Yes
But then millions might becime taxable.
The whole thing is now a total f*** up.
First time I’ve seen you swear Richard.
Totally understandable and entirely appropriate.
I do, occasionally.
When I do it has meaning, as a result.
My suggestion might be……..
Fix the payment at a weeks pension so it isnt eroded by inflation, and
Make it taxable
Hardly Nobel Prize winning but its sorted
Seems like a lot of admin to me.
Make it an untaxed universal benefit for all pensioners.
Much cheaper than a full nuclear programme including power stations, submarines and fighter jets. They found the money for those little items where?
Hmmm… I have the HMRC app… that tells me at a glance how much income I have (definitely nowhere near 35k)… so I don’t see the need for all this “give it but recoup it later via tax returns” The info is already there.
Very politely, if this were true for you (and it will not be, because some of that information is not in real time) it will not be true for everyone for reasons that I outline in a blog post today. Please stop being naive, and projecting your situation onto everyone else.
Which ‘week’s pension’? The one actually received, so those who receive most get even more, the old basic pension which is so little that those who get it are entitled to claim pension credit, or the new basic pension which is already above the tax threshold, so everyone will immediately lose 20% ofit in tax?
From the Guardian
“All pensioners with an income of £35,000 or less a year will have the winter fuel payment restored in full, Rachel Reeves has announced, after weeks of uncertainty over the decision to make a U-turn on scrapping the benefit.
Ministers are restoring the automatic payments as a universal benefit this winter and then recouping the money when higher-income pensioners fill in their tax returns”
Since when was £35,000 income a change in tax threshold?
See comment now added to the post.
At this point it is just an evil combination of face-saving and performative cruelty. A straightforward removal of the WFA’s tax exemption would be far cheaper to administer and probably save more money overall.
I think they’ve had a form to complete in the past, and quite a long one at that.
“Pensioners face ‘daunting’ task of answering 243-question form to get winter fuel payment”
Sky News, Aug 2024. https://news.sky.com/story/pensioners-face-daunting-task-of-answering-243-question-form-to-get-winter-fuel-payment-13205414
This can only have been created as a deterrent. The alternative is universalism, of which there are many benefits.
Universalism, though, is ideologically toxic to the right. Treating everyone as equal just nauseates them.
I believe that was the form to claim pension credit which, last year, you had to receive to get WFA. It’s purpose clearly seemed to be as a deterrernt.
I imagine it will be added to the state pension payments so it will potentially incur income tax deductions. People I know who did not need the WFP in the past would pass it on to family or friends who were in need, or charities, thus returning the payments back into the economy.
That is not the case
Tbis will be tax free unless paid to someone earning ovcer £35,000, when the tax rate is a bizarre 100%.
Thanks Richard, – what about those who receive more than £35,000 via dividends or capital gains but only a modest pension?
EWe don’t knwo aboiut capital gains.
Dividends are part of income.
what does RR mean as income? does she mean taxable income? what about ISA income which is normally not declared being ‘tax free’? what about those who’s income, or part thereof, comes from Capital Gains? I can see more questionable scenarios, and I can foresee a right mess!
I can see a tax nightmare.
There is also now a new tax rate – of 100% on this source.
“I can see a tax nightmare.”
Well, if Reeves/the Treasury/HMRC think they can manage this ok, then I say they’ve got no excuse for not having a go at the much more straightforward tax reforms you advocate in the TWR.
The tax return issue was Don Neidle’s salient point when this was raised a couple of weeks ago. The important point I was trying to make then was to protect the payment of universal benefits, against means testing. Means testing is the problem; but the answer remains that we need to pay universal benefits without the disaster, and costs of means testing. Just paying the universal benefit is not enough.
Personally, if Reeves is going to pay the universal benefit, and then tax it back; in principle (note – in principle) that is a win for a fair, progressive tax system. The problem is, so many pensioners are not on PAYE, and do not submit a tax return. The bureaucracy of delivery is the problem, not the principle. So change the model to accommodate the WFA. After all, when Gordon Brown introduced it, it as an outlier, an oddity in the tax system. It didn’t fit. This is the way we do business in the UK. Randomly. No system in the system.
The answer, to me has to be to raise the threshold, or make an exception on tax returns for the winter fuel allowance, or raise the basic income tax allowance specifically for pensioners (in a sense that is what it really was, surely?). The technical administration should adjust to the circumstances, not the other way round. HMRC can devise a rational fix. Or is that just too much for Britain?
Whether or not pensioners submit a tax return, HMRC must know their income. Whether they know they know their income is another matter; but if they don’t, they should; because if the income is not in the black economy much of it must be caught in the tax system already. Or the pensioner ought to be making a tax return if there is a significant change. Of course HMRC may not be up to coping with this; but what does that say about government and tax?
My point is, arguing for paying a universal benefit, and taxing back the wealthy should be fundamental (making adjustments for the non wealthy). But paying a universal benefit and not making any effort to tax the wealthy is just a gold-plated political gift to the Means Testers; and we can expect the Government will means test something, just to placate the lobby; whatever it costs (after all, whose counting the cost of means testing now?).
John
There are wide ranges of income HMRC know nothing of. Self employed income. Dividends. Capital gains, as they are income. And what about ISAs? Why are they exempt? The challenges this creates are going to be enormous.
Only extending the pension and the personal allowance works, or simply pay it to everyone universally and leave it untaxed, as things were. They really have dug a masive hole and jumped into it.
Richard
There is an exemption on the first £500 of dividends, I think; therefore exemptions can be fitted in, especially for smaller amounts; ISAs, another exemption. The mess began with the way Gordon Brown implemented it. The problem is the Means Test ideology will prevail in our current politics. The implication of Reeves taxing it back is that it is universal benefit, but Reeves is plugging it as plugging her approach as ‘Means Testing’. Follow that logic and there is no difference between Means Testing, and a progressive income tax system. This does no good for the fair, compassionate and understandable tax system (as a system, not a random application of anomalies that brings tax into disrepute), to which you aspire, and defend so stoutly.
It is already a confused mish-mash between a personal tax and household benefit.
Exemption is the easy answer.
And she is doing nothing to limit ISAs for the wealthy
We could do with being rid of all these exceptions
Most of the income sources you list, at least where material, I suspect only apply to those who are already submitting a tax return (and as a rule of thumb, the more boxes on your list they tick, the more likely they are due to submit a tax return anyway), and some on the list will already be captured by HMRC or somewhere on the tax system, if only as exemptions; or ought to be known already by HMRC on any measure of rationality; and if they are not submitting a return, HMRC should be on their case for reasons unconnected to WFA. In which case we are shrinking the cases of those who are not being captured in some way.
You are over optimistic about data sources to HMRC. They do not catch large amounts of data.
To add further to the complexity, a couple with two £30k incomes gets it, but a £10k and a £50k couple gets less. Should simply be abolished in it’s entirety and stick £5 a week extra on pension credit. If they want to be paid the wfa in a lump sum, they can save it up, they’re old enough to know how to budget. For those incapable there’s already a range of support.
Congratulations on picking up today’s ‘idiot of the day’ award.
You are banned.
This is a genuine question from a position of ignorance: are HMRC’s data records of wealth so inadequate that it is not possible from currently collected data to rank order the wealthiest to the poorest for those who keep their money within the UK?
And therefore a means test cannot be daily applied except at a cost that exceeds the savings?
HMRC has no wealth data. Period.
Didnt one Queen – Victoria? reputedly ask her Prime Minister how much it would cost to fence off the Serpentine to which the reply was ‘Two Crowns’
She took the hint
This seems like a similar debacle that may well cost Labour the next election
It would surely be much simpler to just increase the State Pension by £300 a year (or whatever the amount is), and thus not have any separate benefit. The fact we have the fuel payment is simply a recognition of the fact you can’t manage on the current state pension.
Agreed – but that would require an increase in the basic personal allowance.
That, of course, is well overdue, but Rachel’s spreadsheet would not allow it.
The state pension is paid tax free, but for anyone in receipt of any other pension the extra £300 will be taxed. The £300 WFA is tax free (household benefit – the Treasury body-swerve), so for example a basic tax payer, to receive a £300 net help to energy bills (the ostensible reason for the WFA), would require the £300 to be grossed up to £375, for £75 they didn’t receive. It is complicated – which is no doubt why Gordon Brown took the easy way out; only now, politically, it isn’t easy at all. It is ‘another fine mess’ we are in, to quote Oliver Hardy.
Umm It’s not £300 until the entire household is over 80 years old. For younger pensioners it’s £200 per household. Honestly is this mess worth the admin costs? It’s all posturing. If Sir Kier thinks middle England won’t claim WFA because we can’t be bothered he it setting himself up to fail ( I shall pay it direct to Amnesty give them gift tax and if I were wealthy enough claim the gift against my higher rate tax ).
The state pension is not tax free. It is taxable income. It has been at such a low level that no one paid tax on it. But frozen thresholds have put paid to that – this year my state pension is above the tax threshold so I pay tax on part of it.
1) I wrote “paid” tax free, in the first place, then taxed back first where there are other pensions. It is not tax free, unless income falls below the allowance.
2) I took the £300 as a single figure in the example calculation, for simplicity.
For me , this solution would be hilarious. I am in a “furren” country , Spain , and we lost the wfa years ago via George Osborne , to appease the Daily Mail readership . This piece of political pútridity said Spain is a Hot Country , failing to note that northern areas like ours , Galicia , in the mountains, regularly can go as low as Minus 12C in winter . To reinstate it via a universal uplift of £300 would return it to all of us vile traitors who left uk at retirement.
And to show the shamefully low old age pension in uk , via my Spanish tax return , which includes a small private income as well , twice I got a small payment from the Spanish government on the grounds my income was too low !!!
I look aghast from afar at this ridiculous wfa argument.
“If you wanted to create mayhem for a £200 allowance for 3.9 million people, you could not do it more effectively than this.”
allowing LINO to say… see it doesn’t work. There is a method in their imbecility.
Of course an additional complication is that this is a household benefit and not a personal benefit. Nice DWP just give each of a two person household half. If you are going to reclaim money through PAYE should it not be a personal benefit to set against a personal tax record. Is there an accountancy perspective on this?
I have never ben aware that this is a household payment.
Are you sure?
Excerpt from Government Press Release 9th June, 2025″
“It is a non-contributory, household payment to support pensioners during the colder months.
From 2025/26 Winter Fuel Payments will be payable in England and Wales at £200 for households including someone between State Pension age and 79, and £300 for households including someone aged 80 or over. Where the household is not getting an income related benefit, such as Pension Credit, a shared payment will be made – e.g. a couple, each under 80, not on Pension Credit will receive a payment of £100 each”.
Of course it becomes muddled because the government refers to Pension Credit, without making the distinction. The real muddle was when it was introduced by Gordon Brown as a tax free protection to pensioners, as a fudge; without thinking it through. But you can only tax it back easily if you operate through the existing personal tax system. The problem of course really only applies to married pensioners. Single people living on their own are easily dealt with through the tax system.
The tax system cannot be easily adapted to accommodate households. That ended more than three decades ago, thankfully. So, that restriction has to go as well.
It is a household payment. I received the full WFA until my partner became eligible. We then received half each.
OK… I live and learn
Yes – this is a sort of household payment. Paid to the oldest in a pensioner couple. Martin Lewis video earlier says that for a couple, it’s assumed each get half (so £150 each for the payment for under-80s). Each will be assessed for income of over £35k. If one goes over that amount, they will lose their £150 in tax. If the other has a lower income, they keep their £150.
This is madness
as far as I know, it is payable to either a one person or to a two person household – different amounts are paid according to – oh – heavens know what – the problem then comes (yes, I am a pensioner in my 80s, and we do die) if one person dies, then there can be a claw back – can you imagine, your husband/wife/partner has just died and ‘government’ (don’t know who will take ownership of ‘clawback’) comes knocking on the door -‘we want our money back’ — “oh mon Dieu” or “oh là là” or “Auweh” – more strain on the NHS, on Social Services – no wonder HBOS went bust (sorry – was preventing from crashing).
Why not mark all pensioners eligible but only pay it to those who claim it? Many who are entitled will either not bother or should rightly feel a bit furtive about claiming something they do not need.
Oh, for heaven’s sake – are you not aware of all the poblems that failure to claim already gives rise to? Billions are not claimed, mainly because people are not told of entitlements and cannot access systems. Do you not care?
I think I can see how they will do this. If I go to the HMRC app I can easily find their estimate of my taxable income. Using this they can readily identify me as over 35k (lucky me), so they can easily identify me as an individual who will need a PAYE code adjustment to recover my payment. What is a bit worrying is the fact that the estimates could be inaccurate and the messy cases where the marginal rate is uncertain will cause taxpayers inconvenience. Most people involved won’t be SA return “customers” and many have inaccurate investment income estimates on their records. Are HMRC up for this challenge, absolutely not. They are already using ridiculously high investment income estimates to mess up people’s codings, and fiscal drag is going to pull increasing numbers of Pensioners into tax for the first time, with HMRC having little information about their financial circumstances. Personally I will use the facility to opt out of receiving the payment to try and prevent HMRC from messing up my tax affairs.
Much to agree with.
but what about (correctly HMRC non-declared) ISA income? – a £1 million ISA will bring in around income +/- £50,000pa (tax free) – that ISA investor could still receive and retain the WFA if other declared (to HMRC) income is lower than £35000-or indeed if they are slowly selling off assets, are Capital Gains taken into account? Richard has previously posted about wealthy individuals being protective of their wealth – would all/some/many of these wealthy individuals keep (ie not either refuse or give away) the WFA if their wealth/income came from ISA investments and/or from Capital Gains is not taken into account?
All wholly relevant questions
Given all the complications outlined in the contributions so far.
What are the chances of RR presenting these changes to Parliament?
Will Mr Speaker be cross?
Will it fall to a Junior Minister?
Now that the dogs in the street know that her “solution” to the problem she created will be a total mess, her inquisition will be a blood-sport.
I can’t wait.
It was presented by Torsten Bell this afternoon – read John Crace in the Guardian. He was dire.
I watched last night. It was dire. Helen Whateley couldn’t believe her luck, as Crace said, Bell gave her a rare chance to shine.
According to Bell, EVERY decision that the Treasury have taken on WFA was the right one. So no apology, because they were right, all along.
We haven’t heard the last of this, because we now await all the anomalies and HMRC coding nightmares.
Then of course there’s that “run on the pound” we were promised – now that WFA will “cost” even more than before plus all that extra pension credit now being claimed (Hallelujah!), not to mention all the magic money trees they just raided for unlawful nuclear weapons proliferation, shouldn’t the economy collapse tomorrow as the “markets” pass judgement?
But I suspect the journalists will downplay that bit, in case it leads to discussion of the :household analogy” after awkward questions about why £11bn of extra pension credit now WON’T crash the economy, when failing to cut £2bn of WFA in July 2024 WOULD.
It was profoundly depressing to listen to a debate where not a single contribution was based on macro-economic reality – where ALL parties appear to believe in the household analogy and just disagreed about how to slice up the pie.
I imagine a webinar will be created by HMRC to advise pensioners.
Job done. Not..
Maybe they could create a bot called Rachel to deal with queries?
(There’s always the Armed Response Team and deportation, or the workhouse for any pensioners who get it wrong.)
On a more serious note, we do now seem to have (& are creating more by the day) an enormous number of income thresholds, and marginal tax rates, which, when combined with other DWP and HMRC thresholds and rates, make the business of being a law-abiding member of the 4 to 5 lower income deciles virtually impossible.
I wonder if HMG (or some public spirited spreadsheet expert) will produce a simple graphic to show just how complicated it is, including ALL DWP benefits (including the astronomical eye-watering marginal effective “tax” rates facing claimants as they breach certain earnings limits) with their eligibility thresholds, effective marginal tax rates, along with income tax rates, plus anything still available from a local authority, on a means tested basis, such discretionary Housing payments or council tax rebates/reductions.
Because on low rates of income, getting this wrong (or the gov’t getting it wrong can be catastrophic, even life threatening. I’ve read some current advice pages, and couldn’t understand much of it, it was so complicated, and I used to help people apply for benefits in my foodbank days.
Is the £35k WFA income threshold per person or per married couple? – the rules on marriage taxation do seem complicated nowadays. I do so get a kick out of Gift Aiding ours to a local housing charity.
2 Cor 9.7 says the Lord loves a “cheerful” giver, the greek word translated “cheerful”, gives us the English “hilarious” which exactly how I feel when I can Gift Aid away my WFA. I take hilarious pleasure in redistributing HMG’s cash – maybe even verging on hysterical. Will Rachel ever have that much fun? I fear not, but remain hopeful.
Thanks
Pensioners living in the free-movement countries and some others that have reciprocal pension agreements with the UK used to get winter fuel allowance if their average temperature was below the south-west of England. That was a George Osborne nonsensefrom about 2015. So a pensioner in Spain was excluded but one in Finland was included. As it was a UK sourced payment, it was taxable income in many of those countries.
But what about pensioners in other countries, who are deprived of pension increases? A universal payment at least gave them something. Are they to be excluded again?
There is a serious problem of the UK mistreating its citizens when they retire outside the UK, with different rules for different countries. Universal WFA was a tiny amelioration.
Aye right!
Because there are loads of retirees living abroad, who are on pension credit, eh?
Some folk seem to love confirming the (mostly undeserved) perception of English-retirees immigrating to other countries!
You do understand what pension credit is, do you?
I’d like to be able to say that by the time all the difficulties get ironed out and everyone knows what they’ll get, it’ll be April. But that would be crass.
To add to the madness – HMRC may miss a lot of data, but there is a bill to give DWP warrantless powers of bank surveillance, property entry, removing your driving licence, earnings deduction at source, and asset seizure.
They have all these powers already but up to now, only with judicial oversight & with warrants. But hey, who needs judicial oversight – Ms. Liz knows best!? Pesky woke judges protecting benefit scroungers and fraudsters?
“The Public Authorities (Fraud, Error & Recovery) Bill”, introduced by Liz Kendall in Jan 2025, now into Committee stage in Lords.
https://bills.parliament.uk/bills/3921/publications
Prem Sikka is amongst those opposing this. .
[…] was a great deal of discussion here yesterday about the government's decision to reinstate the winter fuel allowance, with decidedly complicated […]