February 2025 money changes for DWP benefit payments, energy bills and cost of living

February 2025 will see a number of changes to personal finances including benefit payments, tax, and support for the cost of living and energy bills. We will then be just a month away from the Chancellor's Spring Budget in the run-up to the start of the new financial year in April.

According to a survey by the British Retail Consortium, consumer expectations for the state of the economy over the next three months have plunged to a new low. Spending forecasts have dropped significantly, although the BRC said this would be largely due to the aftermath of the Christmas period as people tighten their belts for the new year.

BRC chief executive Helen Dickinson said: "As the Government warns of tough times ahead, it is little surprise that the public have caught the January blues. Consumer confidence in the economy fell to a new low, with concerns most pronounced among older generations."

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This is likely to be partly due to the cuts to the Winter Fuel Payment. Around 10 million state pensioners have been forced to manage without their usual fuel allowance of up to £300 during the recent spells of bitterly cold weather. In addition, thousands of benefit claimants of both pension age and working age are being moved to Universal Credit (or, in some cases, Pension Credit) as part of an accelerated 'managed migration' before a number of old-style benefit schemes such as tax credits are closed down for good.

The new year money changes come as the Government faces continuing pressure over public finances which is set to trigger a new round of spending cuts in the Spring Budget, with disability and incapacity benefits indicated as one major target. We have listed all the main money changes coming in February below.

Universal Credit changeover accelerated

Labour is stepping up the transfer of people from old-style benefits to Universal Credit from February. The final wave of people to be sent Migration Notice letters asking them to make the switch are those on income-related Employment and Support Allowance (ESA).

In the October Budget, it was confirmed that 800,000 people on ESA will move to Universal Credit by March 2026, two years ahead of schedule. This is to be ramped up with 63,000 letters sent to this group of claimants each month from February until the end of the year.

All six legacy benefits affected by the move will be phased out by April 2026. The first two to be scrapped will be Working Tax Credit and Child Tax Credit, which will cease to exist by the end of this March.

Benefit payment date changes

2025 is not a leap year so February has 28 days. This could mean adjustments to payment dates for those on Universal Credit, which is paid to every claimant on the same date each month that they received their first payment.

So, for instance, if you were first paid Universal Credit on November 30, it will be credited to your account on the 30th of each month after that - except when that falls on a weekend or bank holiday or if the month has fewer days.

For February, this means that anyone whose Universal Credit is normally paid on the 29th, 30th or 31st of the month should see the money go in earlier on Friday, February 28. Some claimants have said that their benefits have in the past appeared in the bank on March 1 instead, but that's a Saturday this year so it's unlikely to happen as Universal Credit isn't arranged to go in at a weekend. Any Universal Credit payment dates that fall on other weekends during February will be moved to the Friday beforehand and there are no bank holidays to mean any further adjustments.

Next interest rate decision announced

The Bank of England will announce its next interest rate decision on February 6. The current borrowing rate is 4.75 per cent, and economists say lower inflation in December strengthens the case for cutting rates to 4.5 per cent.

Some analysts have forecast that interest rates will continue going down this year and that 2025 will end with interest rates somewhere between 3.75 per cent and 4.25 per cent.

New inflation figures to be released

The UK Consumer Price Index (CPI) measure of inflation for January will be released on February 19. The Office for National Statistics will be publishing the data. The most recently announced inflation level for December 2024 is 2.5 per cent, down from 2.6 per cent the month before.

This means the rise in the prices of goods and services in the year to December 2024 dipped to 2.5 per cent, the first fall in three months.

Energy bills to rise as Ofgem price cap goes up

The next change in the Ofgem price cap will be announced on February 25. It will then come into effect on April 1 - and it means our energy bills are likely to go up again.

The current price cap (in place from January 1 to March 31) is set at £1,738 a year for a typical household that uses gas and electricity and pays by direct debit. This is a rise from the October-December price cap of £1,717.

Energy analysts at Cornwall Insight have predicted that the next price cap level from April will be £1,785, a rise of £47 or 3 per cent on the current level. However, the experts pointed out that the figures do not include potential reforms which could come in from April, including incorporating allowances to fund the Energy-Intensive Industry (EIIs) network charge exemption scheme. There is also a potential extension by Ofgem of the existing Supplier Bad Debt Allowance. These could add at least £20 to projections, Cornwall Insight warned.

HMRC tax fines will start

HMRC will begin issuing tax fines for those who didn't pay by the self-assessment deadline of January 31. Those who miss the deadline could face a £100 penalty for submitting their tax returns late, even if no tax is owed, followed by other penalties at intervals after that if the documentation is still not completed.

People may need to file a return if they are newly self-employed and have gross income over £1,000, or have earned below £1,000 but wish to pay Class 2 National Insurance Contributions voluntarily to protect their entitlement to State Pension and certain benefits. You may also need to fill in a tax form if you're a new partner in a business partnership, have received any untaxed income over £2,500, or receive Child Benefit payments and need to pay the High Income Child Benefit Charge because you or your partner earned more than £50,000.

After three months of failing to submit a self-assessment tax return, there are additional daily penalties of £10 a day, up to a maximum of £900. Further penalties apply after six and 12 months.

Cost of living support continues

Cost of living payments and other assistance from the Household Support Fund will continue throughout February. The Department for Work and Pensions added another £421 million into the fund, which is shared among councils in England to distribute among local people who need help with essential costs such as food and energy bills.

The latest round of funding started in October and will run until the end of March. Dudley Council reopened its allocation of the fund to applications on January 22 to offer £200 payments to low-income households. However, Birmingham's scheme, which also provides £200 payments, has been paused until March so it can deal with all the existing requests first.

Winter Fuel Payment deadline closes

Most people receive the Winter Fuel Payment in November and December, but some may get it later. The DWP says anyone who has not yet received the allowance or a letter confirming their eligibility must raise the issue by January 29.

The amount paid is £200 if you were born between September 23, 1944, and September 22, 1958, and £300 if born before September 23, 1944. Eligibility for the payment has been narrowed down to pensioners on Pension Credit or who live in mixed-age households receiving other means-tested benefits. These are Universal Credit, Income Support, income-based Jobseeker's Allowance, income-related Employment and Support Allowance (ESA), Child Tax Credit and Working Tax Credit.

Those who have reported a missing payment by the January 29 deadline could potentially receive their Winter Fuel Payment sometime in February if the DWP confirms they were somehow overlooked.

Deadline for Warm Home Discount

The Warm Home Discount scheme will continue running throughout this month until the end of March but some will need to call the scheme's helpline by the end of February before their cash sum is paid out. The scheme provides a £150 rebate on electricity bills, although it can be applied to your gas bill instead if you are a dual-fuel customer.

If you are due to get the discount, you should have received a letter between October 2024 and early January 2025. Some people will have been told they need to provide more information first, such as confirming the name of their energy supplier, and this will need to be done by February 28, 2025. The Warm Home Discount helpline is available on 0800 030 9322 from 8am to 6pm, Monday to Friday.

Those on the guarantee credit element of Pension Credit qualify automatically. Others may be eligible if they are on low-income benefits and live in a property that's calculated to have high energy costs based on its age, type and floor area. The qualifying benefits are Universal Credit, Income Support, income-based Jobseeker's Allowance, income-related Employment and Support Allowance, Working Tax Credit, Child Tax Credit, Income Support, and the savings credit element of Pension Credit.

New Cold Weather Payments could be made

Cold Weather Payments can be made up to March 31, so any more spells of freezing temperatures in England and Wales could trigger further payouts from this scheme. The DWP pays low-income households £25 each time the average temperature in their area is recorded as zero degrees Celsius or below over seven consecutive days or is forecast to be so. Payments go into bank accounts within 14 days.

To be eligible, you need to be on Universal Credit, Income Support, income-based Jobseeker's Allowance, income-related Employment and Support Allowance, Income Support, or Support for Mortgage Interest. You usually also need to be receiving a disability or pensioner premium on your benefits, have a disabled child, or a child under the age of five living with you. Those on Universal Credit qualify if they are not employed or self-employed and have limited capability for work - but anyone with a disabled child will be eligible regardless of whether they are working or not.

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