The UK debt crisis is of great concern; however, this crisis may not be as one would initially perceive. Millions of Britons are living in the red due to debt, but not as a result of their own greed, but to make ends meet. Now, HM Revenue & Customs may take money from your bank, with 2 million pensioners affected by the money grab in particular. Will this move by the Government help settle some of the country’s debt, or will it only make matters worse? Discover the details about the debt recovery today.

HM Revenue & Customs may take money from your bank

Debt is a problem in the UK. Due to the financial crash and the COVID-19 pandemic, the UK’s debt has significantly increased. Besides the fact that the government borrowed £20 billion over the course of September 2025, the real debt crisis concerns the 4 million Britons living in a ‘negative budget situation’. Simply put, they cannot afford essentials and make ends meet without borrowing money.

According to Funding the Future, people are taking on debt for essentials such as rent, energy, food, education, transportation, and clothing. This is why benefit schemes are so crucial in the UK, as the additional income truly assists citizens to afford things that their livelihoods depend on. Now, HM Revenue & Customs (HMRC) may come after a specific benefit scheme, resulting in 2 million pensioners affected.

2 Million pensioners affected by the money grab

A new Winter Fuel Payment regulation will target one group of pensioners. The HMRC has confirmed that the new regulation would allow the deduction of benefits from nearly 2 million pensioners. The money will initially be distributed to these pensioners, and then be recovered in the form of tax. The reason for the deduction is due to one particular requirement that these pensioners no longer meet.

The new Winter Fuel Payment regulation has introduced a new income threshold, and any pensioner earning more than the threshold will no longer qualify for the benefits from the scheme. According to a report by The Independent, the new income threshold is:

An annual income of £35,000 or less

Anyone with earnings of over £35,000 annually will have their Winter Fuel Payment reclaimed via the Pay As You Earn (PAYE) system through a change to their tax code. The HMRC will deduct the amount in monthly instalments during the 2026/2026 tax year, starting from April 2026. For those who are in debt, there is one silver lining to the benefit deductions.

An average of £420 to remain untouched

The UK Government has relaunched the DRD scheme, which will target people with confirmed debts with instant deductions. However, on Wednesday, 30 April 2025, a change to the Universal Credit’s Fair Repayment Rate came into effect. Initially, the Fair Repayment Rate placed a 25% limit on how much could be deducted from debtors’ benefits.

With the introduction of the change, the limit has been reduced to 15%. According to the UK Government, the lower limit will allow 1.2 million of the poorest UK households to keep an average of £420 in additional benefits each year. The 1.2 million includes 700,000 households with children, thus allowing them to repay debts in a ‘sustainable way.’

Ensuring that people can retain their benefits will help increase financial security and improve living standards. For most, it means they will have additional money to afford the essentials, not only for themselves, but for their children as well. Some financial experts have advised that those who no longer qualify for Winter Fuel Payments may want to consider opting out of the scheme, but the decision remains up to them. For additional information about the Universal Credit change, please visit the UK Government website to review the official statement from the HMRC.

Disclaimer: Our coverage of one-off payments, support payments, tax reliefs, tax refunds, tax credits, and other payments is based on the official sources listed in the article. All payment amounts and dates, as well as eligibility requirements, are subject to change by the governing institutions. Always consult the official source we provide to stay up to date and obtain information for your decision-making.