Martin Lewis 'surprised' about how new Winter Fuel Payments will work

Winter Fuel Payments have been reinstated for pensioners, meaning households with under 80s will receive £200 this winter and households with over 80s will get £300

Martin Lewis has said he is "surprised" about how the new Winter Fuel Payments will work. The payments, intended to help with the cost of energy bills, have been restored to the vast majority of pensioners who previously received it - but the way it is calculated has changed.

Nine million pensioners in England and Wales will receive the Winter Fuel Payment this winter after a government U-turn, it was announced, yesterday, June 10.

It comes after the payments were slashed last year as they became means tested for the first time - meaning that anyone earning over the £11,600 threshold didn't get any help over the winter.

Now the government has reinstated it as a universal payment for all state pensioners in winter 2025. The new rules mean pensioners earning less than £35,000 will get the full amount and anyone earning over this threshold will have the payment taxed and clawed back through the PAYE system.

Posting about his initial reaction to the changes, Martin Lewis said: "This is a very big improvement on what we already had and it does mean there's still a means test in place.

"I feel relieved. That's my instant reaction to the news, relived that there's an improvement."

However, the Money Saving Expert said he was "surprised" about the new tax clawback system announced as part of the payments.

He said: "Crucially, and this is the one thing that has surprised me about the announcement, because much of it was flagged in advance as the suspected way they would change it.

"The way it will work is, even though the payment is a household payment, the tax clawback is an individual tax clawback."

So for the first time, if people earn over £35,000 their share of the household payment will be clawed back either through the PAYE or the self-assessment tax system - although Mr Lewis said it will not push anyone into self-assessment who wouldn't already be on self-assessment anyway.

For example, this means for a household due to get £300 with two State Pensioners in, the payment is seen as £150 per person.

So if one of the recipients earns less than £35,000 they will not get taxed on their £150, but if the other recipient earns more than £35,000 they will be taxed on their £150.

If both earn less than £35,000 no one will be taxed, and if both earn more than £35,000 all £300 would be taxed.

He added: "Now that is a good system compared to what we thought was going to happen, that it would be something akin to the Child Benefit Higher Income tax charge, where the whole benefit depends on the highest earner's income.

"And in fact, I think now we know this system can be done, there's an argument for for that change to be made for the Child Benefit system, too."

He added: "Do I think this is an improvement? Yes, very much so.

"Now every State Pensioner household will get this by default unless they chose to opt out of it, which means those vulnerable households who are least likely to act will automatically get it.

"So for that, I'm very grateful to the Chancellor for listening to me and the many other people who have been campaigning on this."

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