How pensioners' Winter Fuel Payment would be eliminated by 2030 if the stealth tax freeze was extended

In a few years, pensioners who only receive the full new state pension will have to pay taxes on their income because the pension is increasing but the thresholds are still fixed

If thresholds stay frozen until the end of the decade, pensioners who rely only on the state pension will have to pay the equivalent of the Winter Fuel Payment in income tax by 2030, according to new data.

According to research by wealth management company Quilter, if the state pension keeps increasing while tax thresholds stay the same, retirees receiving only the full new state pension might have to pay £200 in income tax by 2029 - 2030.

Income tax thresholds were frozen by the Conservatives until 2028 while they were in power, and there is currently conjecture that Labour Chancellor Rachel Reeves may extend the freeze until 2030.

Beginning in April 2026, the state pension will increase by 4.8%, making the total new amount worth 12,547 annually.

According to the Bank of England's 2026 inflation forecast, pensioners may receive an additional 3% increase in 2027 - 2028.

According to Quilter, the total new state pension amount will be worth 13,623 by 2029/30 if the state pension increases by 2.5 percent in 2028/29 and 2029/30 under the triple lock.

A person on the full new state pension would have to pay 200.17 in income tax by 2029/30, which is equal to the average Winter Fuel Payment, if the tax-free personal allowance, which is currently 12,570, is kept frozen until 2030.

Quilter cautioned that unless the government raises the 35,000 threshold, pensioners with additional income (roughly £22,000 annually) and a full new state pension may also lose their eligibility by 2029/30 as the Winter Fuel Payment is eliminated for those with annual incomes over £35,000.

Quilter retirement specialist Adam Cole stated: "In a matter of years, people whose only source of income is the state pension will not only be paying taxes, but they will do so at levels that would eliminate the government's Winter Fuel Payment, which is intended to assist those who are most vulnerable.

"Many people would completely lose the benefit if the Winter Fuel Payment threshold was not raised, which would also create a variation on the fiscal drag theme. A "

Quilter is the source.

Pensioners must pay retirement taxes due to fiscal drag.

The income tax thresholds have been frozen since 2021 and will remain so until 2028.

In order to raise more money for the Treasury, there are rumors that Chancellor Rachel Reeves may announce an extension of the freeze until 2030.

Extending the freeze from 2028 to 2030, along with a frozen top rate of National Insurance contributions (NICs) since 2021, would raise an additional 8.3 billion, according to the Institute for Fiscal Studies (IFS), a prominent UK think tank.

Freezing income tax thresholds, however, is viewed as a "stealth" tax since people pay more when their wages and incomes increase in tandem with inflationa phenomenon known as fiscal dragrather than being directly taxed more.

Anyone impacted by income tax thresholds is impacted by fiscal drag, not just retirees.

According to recent research FOI figures obtained by Rathbones, hundreds of thousands more taxpayers will fall into the 60 percent tax trap by 2028/29 as a result of fiscal drag.

Who is qualified for the Winter Fuel Payment and what is it?

Pensioners earning £35,000 or less are eligible for the Winter Fuel Payment, which is given to them once a year. Up to 300 is its maximum value.

The payment is typically made automatically in November or December and is intended to cover the additional cost of heating during the colder winter months.

Depending on your situation, the precise amount you receive may vary from £100 to £300. Nevertheless, 200 was given to 62% of all Winter Fuel Payment recipients last winter.

For instance, people born between September 22, 1945, and September 21, 1959, who live alone, are eligible for 200.

Whether you receive benefits like Universal Credit or Pension Credit determines how much you get. You can access the complete eligibility requirements on gov . uk.

You will receive the Winter Fuel Payment if your annual income exceeds £35,000, after which HMRC will recoup it. The option to withdraw from this year's payment has expired.