What is the Fuel Direct Scheme?

What is the Fuel Direct Scheme?

Many households find it hard to manage energy bills. If you fall behind and receive certain benefits, the Fuel Direct Scheme can step in to help clear what you owe. Officially known by the Department for Work and Pensions (DWP) as Third Party Deductions, the scheme pays your energy supplier directly before your benefit money reaches your bank account.

The scheme is designed to stop debts from spiralling out of control. Once it is set up, deductions are paid directly to your supplier and reduce the arrears over time. This can make budgeting easier, but because the money is taken at the source, it leaves you with less cash each month for other essential living costs.

Understanding how the deductions work, how much will be taken, and what your rights are is important before you or your supplier set the arrangement up.

How does the scheme work?

The Fuel Direct Scheme splits your energy costs into two separate parts: paying off the debt you already owe, and paying for the energy you are using right now. The rules for how these two parts are handled are very different.

Paying off your energy debt

If you owe money to your energy supplier, they can ask the DWP to take a fixed amount from your benefits to clear the arrears. Under current rules, your supplier does not need your permission to apply for this debt deduction. They can request it directly from the DWP if you have failed to pay what you owe.

Paying for ongoing energy usage

You can also choose to have your current, ongoing energy bills paid directly from your benefits alongside your debt payments. Unlike debt recovery, your supplier must have your clear, explicit consent to set this up. They cannot force you to pay for your ongoing usage through your benefits.

If the amount taken for ongoing usage needs to change, the supplier must use current usage based on a meter reading, not an estimate. The supplier needs your consent to increase the amount for ongoing usage.

Who can use Fuel Direct?

You cannot use the Fuel Direct Scheme just because you want an easier way to pay your normal energy bills. The primary rule is that you must currently be in debt or arrears to your energy supplier. If your account is in credit or your balance is zero, you cannot join the scheme.

You must also be receiving one of the following income-related benefits:

If you receive other benefits that are not on this list, such as Personal Independence Payment (PIP), Housing Benefit, or contribution-based JSA, you cannot use them for the Fuel Direct Scheme. The deductions can only come from the specific income-related benefits listed above.

How much money will be deducted?

The amount taken from your benefits for energy debt is strictly fixed by the government. Your energy supplier cannot ask the DWP to take a larger amount just because your debt is high.

For people on Universal Credit, the 5% deduction for energy arrears is based purely on your standard allowance. Depending on your age and whether you claim as a single person or a couple, this works out at around £17 to £33 a month for the 2026 to 2027 tax year. For those on legacy benefits, the rate for the 2026 to 2027 tax year is fixed at £4.80 a week.

The 15% overall deduction cap

Many people who have energy debt also have other arrears, such as unpaid rent, council tax, or water bills. The DWP can make Third Party Deductions for these debts too. However, there is a strict limit on how much they can take in total.

Following the introduction of the Fair Repayment Rate, most Universal Credit debt deductions are normally capped at 15% of the standard allowance, reduced from 25%. However, gas and electricity arrears are last-resort deductions, so total deductions can exceed 15% where needed to prevent disconnection.

The trade-offs of using the scheme

Having your energy debt managed directly through your benefits has clear practical effects. It is worth weighing up how it will change your daily budgeting before agreeing to add ongoing usage to the arrangement.

The biggest advantage is the immediate relief from debt pressure. The ability to open your post without worrying about another final demand from your energy supplier can greatly improve your mental wellbeing. It gives you the breathing space needed to organise other parts of your household budget.

On the negative side, the payments are non-negotiable once applied. You cannot simply cancel them at your bank like a Direct Debit. If you face a sudden emergency and need that money for something else, there is no wiggle room to alter the payment for that month. Because the deduction amounts are relatively low, a large debt can also take a significant amount of time to clear completely.

Fuel Direct and prepayment meters

You can still use Fuel Direct if you have a gas or electricity prepayment meter, but only deductions for arrears can be taken. You still need to top up separately to pay for the energy you use now.

Energy prices and standing charges vary by tariff, payment method, meter type and region. Compare the available tariffs and get advice from your supplier before deciding which payment method is most affordable for you.

How to apply and how to stop payments

The process of setting up the scheme usually starts with your energy supplier. You can contact them directly and explain that you want to pay your arrears through Fuel Direct. Your supplier may ask for your National Insurance number, energy account customer reference number and details of how much you owe. A request can still be accepted without a National Insurance number.

Your supplier will then contact the DWP to arrange the deductions. Alternatively, you can reach out to Jobcentre Plus or your pension centre, who can help facilitate the setup alongside your supplier.

Stopping the deductions

Halting the payments is harder than starting them. If the deduction is strictly for debt recovery, it will usually remain in place until the account is back in balance. If you are struggling to cope with the reduced benefit income, you must contact your energy supplier and ask them to agree to a different payment plan. The DWP will not usually stop a debt deduction unless the supplier confirms the debt is clear or agrees to an alternative.

If your deductions also cover your ongoing energy usage, you have more control over that specific part. Because ongoing usage requires your consent, you can contact the DWP and your supplier to withdraw your permission for the ongoing usage deductions at any time, though the debt deductions will continue.

Other financial support for energy bills

If you are struggling with fuel debt, getting independent advice is a key step. Organisations like Citizens Advice offer free, confidential help and can explain the best solutions for your specific circumstances. Alongside Fuel Direct, you should check if you qualify for other government schemes designed to help with winter energy costs.

Always check GOV.UK or speak to your supplier to confirm the exact eligibility rules for these schemes, as the criteria can change depending on where you live in the UK and what benefits you receive.