diff --git a/lightning/src/ln/channel.rs b/lightning/src/ln/channel.rs
index 03968118a16..0b434ef90ce 100644
--- a/lightning/src/ln/channel.rs
+++ b/lightning/src/ln/channel.rs
@@ -2192,7 +2192,7 @@ impl<Signer: Sign> Channel<Signer> {
 		// We can't accept HTLCs sent after we've sent a shutdown.
 		let local_sent_shutdown = (self.channel_state & (ChannelState::ChannelFunded as u32 | ChannelState::LocalShutdownSent as u32)) != (ChannelState::ChannelFunded as u32);
 		if local_sent_shutdown {
-			pending_forward_status = create_pending_htlc_status(self, pending_forward_status, 0x1000|20);
+			pending_forward_status = create_pending_htlc_status(self, pending_forward_status, 0x4000|8);
 		}
 		// If the remote has sent a shutdown prior to adding this HTLC, then they are in violation of the spec.
 		let remote_sent_shutdown = (self.channel_state & (ChannelState::ChannelFunded as u32 | ChannelState::RemoteShutdownSent as u32)) != (ChannelState::ChannelFunded as u32);
diff --git a/lightning/src/ln/channelmanager.rs b/lightning/src/ln/channelmanager.rs
index 8fc0b2a8bdb..f4a53300e2c 100644
--- a/lightning/src/ln/channelmanager.rs
+++ b/lightning/src/ln/channelmanager.rs
@@ -3515,33 +3515,34 @@ impl<Signer: Sign, M: Deref, T: Deref, K: Deref, F: Deref, L: Deref> ChannelMana
 				}
 
 				let create_pending_htlc_status = |chan: &Channel<Signer>, pending_forward_info: PendingHTLCStatus, error_code: u16| {
-					// Ensure error_code has the UPDATE flag set, since by default we send a
-					// channel update along as part of failing the HTLC.
-					assert!((error_code & 0x1000) != 0);
 					// If the update_add is completely bogus, the call will Err and we will close,
 					// but if we've sent a shutdown and they haven't acknowledged it yet, we just
 					// want to reject the new HTLC and fail it backwards instead of forwarding.
 					match pending_forward_info {
 						PendingHTLCStatus::Forward(PendingHTLCInfo { ref incoming_shared_secret, .. }) => {
-							let reason = if let Ok(upd) = self.get_channel_update_for_unicast(chan) {
-								onion_utils::build_first_hop_failure_packet(incoming_shared_secret, error_code, &{
-									let mut res = Vec::with_capacity(8 + 128);
-									// TODO: underspecified, follow https://github.com/lightningnetwork/lightning-rfc/issues/791
-									res.extend_from_slice(&byte_utils::be16_to_array(0));
-									res.extend_from_slice(&upd.encode_with_len()[..]);
-									res
-								}[..])
+							let reason = if (error_code & 0x1000) != 0 {
+								if let Ok(upd) = self.get_channel_update_for_unicast(chan) {
+									onion_utils::build_first_hop_failure_packet(incoming_shared_secret, error_code, &{
+										let mut res = Vec::with_capacity(8 + 128);
+										// TODO: underspecified, follow https://github.com/lightningnetwork/lightning-rfc/issues/791
+										res.extend_from_slice(&byte_utils::be16_to_array(0));
+										res.extend_from_slice(&upd.encode_with_len()[..]);
+										res
+									}[..])
+								} else {
+									// The only case where we'd be unable to
+									// successfully get a channel update is if the
+									// channel isn't in the fully-funded state yet,
+									// implying our counterparty is trying to route
+									// payments over the channel back to themselves
+									// (cause no one else should know the short_id
+									// is a lightning channel yet). We should have
+									// no problem just calling this
+									// unknown_next_peer (0x4000|10).
+									onion_utils::build_first_hop_failure_packet(incoming_shared_secret, 0x4000|10, &[])
+								}
 							} else {
-								// The only case where we'd be unable to
-								// successfully get a channel update is if the
-								// channel isn't in the fully-funded state yet,
-								// implying our counterparty is trying to route
-								// payments over the channel back to themselves
-								// (cause no one else should know the short_id
-								// is a lightning channel yet). We should have
-								// no problem just calling this
-								// unknown_next_peer (0x4000|10).
-								onion_utils::build_first_hop_failure_packet(incoming_shared_secret, 0x4000|10, &[])
+								onion_utils::build_first_hop_failure_packet(incoming_shared_secret, error_code, &[])
 							};
 							let msg = msgs::UpdateFailHTLC {
 								channel_id: msg.channel_id,
diff --git a/lightning/src/ln/functional_test_utils.rs b/lightning/src/ln/functional_test_utils.rs
index 4f6bfc4d0a6..477377866e3 100644
--- a/lightning/src/ln/functional_test_utils.rs
+++ b/lightning/src/ln/functional_test_utils.rs
@@ -1050,8 +1050,7 @@ macro_rules! expect_payment_failed_with_update {
 				match network_update {
 					&Some(NetworkUpdate::ChannelUpdateMessage { ref msg }) if !$chan_closed => {
 						assert_eq!(msg.contents.short_channel_id, $scid);
-						// TODO: Fails for htlc_fail_async_shutdown
-						//assert_eq!(msg.contents.flags & 2, 0);
+						assert_eq!(msg.contents.flags & 2, 0);
 					},
 					&Some(NetworkUpdate::ChannelClosed { short_channel_id, is_permanent }) if $chan_closed => {
 						assert_eq!(short_channel_id, $scid);
diff --git a/lightning/src/ln/shutdown_tests.rs b/lightning/src/ln/shutdown_tests.rs
index 036d612226b..26d39fbad9d 100644
--- a/lightning/src/ln/shutdown_tests.rs
+++ b/lightning/src/ln/shutdown_tests.rs
@@ -193,7 +193,7 @@ fn htlc_fail_async_shutdown() {
 	nodes[0].node.handle_update_fail_htlc(&nodes[1].node.get_our_node_id(), &updates_2.update_fail_htlcs[0]);
 	commitment_signed_dance!(nodes[0], nodes[1], updates_2.commitment_signed, false, true);
 
-	expect_payment_failed_with_update!(nodes[0], our_payment_hash, false, chan_1.0.contents.short_channel_id, false);
+	expect_payment_failed_with_update!(nodes[0], our_payment_hash, false, chan_2.0.contents.short_channel_id, true);
 
 	let msg_events = nodes[0].node.get_and_clear_pending_msg_events();
 	assert_eq!(msg_events.len(), 1);