Martin Lewis explained what could push people over winter fuel payment limit (Image: ITV)
Personal finance expert Martin Lewis has given an update on people with Premium Bonds who might be worried about the potential impact on their winter fuel payment. Earlier this month Chancellor Rachel Reeves did a U-turn on her axe of the benefit of ￡2-300 which had been lost by 9 million pensioners.
This means everyone will be paid the benefit automatically - however anyone who has a taxable income of more than ￡35,000 will have to pay it back again. Mr Lewis explained that this relates to taxable income - and although savings are exempt, any interest earned on savings is not.
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For basic rate taxpayers earning under ￡50,270 there is savings allowance of ￡1,000 tax free - which means you could have ￡20,000 in a 5 per cent savings account and it would be tax free. Speaking on his podcast Mr Lewis explained that in some circumstances a modest amount of savings interest could contribute to this total, potentially pushing people over the threshold.
In the case of Premium Bonds, Mr Lewis suggested that although it was not confirmed yet, because winnings are not taxable, people should be ok. He said: “We don’t yet know if Premium Bond wins count or not. I’m almost certain they don’t count because they’re not taxable income but I’m waiting to get that confirmed.
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“While the Personal Savings Allowance is an amount you are allowed to earn of savings interest tax free - as a basic rate taxpayer you can earn ￡1,000 of interest outside an ISA tax-free - that interest still counts towards your tax-free earnings for winter fuel payment.
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“So let me just do a really simple example: you earn ￡1,000 of interest inside an ISA. Doesn’t count. You earn ￡500 of interest within your Personal Savings Allowance so you don’t pay tax on it. That ￡500 does count towards the ￡35,000 a year threshold.”
However he has warned savers that having their money in the wrong accounts could push them over the threshold and make them miss out on the winter fuel payment. Caller Elaine, said she is a state pensioner and also works part time. She reckoned she earns just under ￡35,000 but also gets savings interest and interest from her cash ISAs. She said: “Will that be included in the total amount of income because if it does then it puts me over the ￡35,000 and I won’t get it.
Martin replied: “The first thing to say is the means test will be based on your taxable income for the current year that is 2025-6. It is all of your earnings that are subject to income tax. So that is any private pension income, any state pension income, any employment income, any savings interest outside of an ISA.
"The interest you get inside of an ISA doesn’t count, the interest outside of an ISA does count.”
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Mr Lewis said in Elaine’s case, because she hasn’t used her full cash ISA ￡20,000 limit, she could move her savings into the cash ISA, the interest wouldn’t count and therefore she wouldn’t be over the threshold and she would get the winter fuel payment. Elaine said: “I’ll do that then.”
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Mr Lewis said investment dividends outside an ISA count, carer’s allowance, incapacity benefit and other taxable state benefits also count.
In terms of what doesn’t count towards the ￡35,000 earnings amount Mr Lewis said it included the winter fuel payment itself, investment income or savings income inside ISAs, the tax free lump sum from a pension, capital gains, and non-taxable benefits like Attendance Allowance, Disability Living Allowance Pension Credit and PIPS all don’t count towards the ￡35,000. He added: “If it’s generally taxable, it counts, if it’s generally not taxable, it doesn’t count.”