Deductions from universal credit for fuel

The Department of Work and Pensions (DWP) can approve deductions from a claimant’s universal credit to pay fuel arrears and in some cases ongoing fuel costs. Payments are made directly to the energy supplier. This process is sometimes called ‘Fuel Direct’.

Deductions for fuel can only be made if the claimant has arrears for:[1]

• mains gas, including reconnection of mains gas

• mains electricity, including any charges for the disconnection and reconnection of mains electricity

• payments under a green deal plan[2]

How an energy supplier requests deductions

Deductions are requested from the DWP by the energy supplier using the application forms located on the DWP website: Applications for 'third party' deductions from Universal Credit - GOV.UK

A deduction for fuel debt cannot begin or resume where the combined earned income of the claimant and any joint claimant exceeds any work allowance they are entitled to.[3]

The DWP can usually deduct up to five percent of the claimant’s universal credit standard allowance to repay fuel debts.

Read more about the standard allowance and other elements of universal credit on How universal credit is calculated on Shelter Legal.

The DWP can approve higher deductions if they deem it to be in the claimant’s best interests.[4] The DWP commonly calls this a ‘last resort’ deduction to prevent disconnection.

The DWP does not need the claimant’s consent to make a deduction for a fuel debt. The Courts have held that the DWP should consult claimants before implementing a similar deduction from ESA,[5] though there is no direct precedent for universal credit.

The DWP must obtain the claimant’s consent to make combined deductions for fuel and water payments that exceed a sum equal to 25 percent of the standard allowance combined with any child element.[6]

Fuel suppliers can request an additional deduction from universal credit to cover ongoing energy costs. Suppliers must have the claimant's consent to apply for a deduction to pay ongoing fuel costs, or increase an existing deduction for ongoing costs.[7]

Additional deductions are capped based on the claimant's estimated average monthly costs for the fuel they accrued arrears for. The DWP must not authorise a deduction if the claimant pays for their ongoing consumption by other means, such as a pre-payment meter.[8]

The energy supplier must provide the DWP with an estimate of the claimant’s average monthly fuel costs. If the DWP finds the estimate unreasonable or inaccurate, it may ask the supplier for details of the calculation. The supplier must recalculate monthly costs periodically and notify the DWP of any credit or debit. The original debt must not be adjusted to take account of additional credit or debit.[9]

Deductions cannot reduce the claimant’s universal credit payment to less than one penny.[10]

The DWP must stop the deduction if the claimant’s earnings, or the combined earnings of joint claimants, meet or exceed their work allowance for three consecutive monthly assessment periods.[11]

A claimant has a work allowance if they are responsible for children or they have limited capability for work.[12]

Read more about entitlement on How universal credit is calculated on Shelter Legal.

If the claimant moves out of the property where the original debt was incurred:

• deductions to cover ongoing fuel costs must stop

• deductions to repay the fuel debt can continue

Deductions for ongoing fuel costs must stop when deductions for arrears stop.[13]

A claimant can request a mandatory reconsideration of a decision to make a universal credit deduction. After reconsideration, a claimant can appeal the decision to the First-tier tribunal.

A claimant can also ask for a reconsideration of the amount of deductions at any time if their circumstances change, for example if the:[14]

• estimated costs for ongoing fuel are too high or too low

• original debt has been cleared so deductions should be stopped

• claimant has changed fuel company and the debt is not transferable

• deductions for fuel would reduce the claimant's universal credit payments to less than a penny

• claimant withdraws consent for deductions to go higher than 25 percent of the standard allowance and child element

• claimant stops receiving fuel from the energy company

The DWP's advice for decision making notes that deductions will not normally be reconsidered simply because the claimant wishes to have more control over their finances.[15]

For more information on mandatory reconsiderations and appeals see: Ways to challenge a universal credit decision

The DWP does not normally make deductions for more than three debts at the same time. Total deductions must not be more than 40 percent of the standard allowance.[16] In practice, the DWP typically limits deductions to 15 percent of the standard allowance.[17]

Deductions for ongoing fuel costs are not subject to this limit.

Where the total deductions for debts would exceed the allowable amount, the DWP applies a priority order to determine which debts are deducted first.[18]

Some debts are taken before the priority system is applied, including fraud penalties and universal credit advances.

Deductions that take priority over fuel debts include:

• child support payments

• housing costs

• rent arrears where the amount is 10 percent of the standard allowance

The DWP can change or stop existing deductions during a claim where new debts have higher priority.

Reads more about how different deductions from universal credit for debts are prioritised on Deductions from universal credit for debts on Shelter Legal.

Where the DWP must choose between gas and electricity debts, it must prioritise the fuel it believes it most appropriate.[19] The Advice for decision making states that priority should be given to whichever fuel is most needed to ensure the health and safety of the claimant and their family.[20]