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    What does the Autumn Budget mean for Family Law?

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    Labour’s first budget in 14 years was delivered on 30th October 2024, bringing in significant changes for tax particularly. But what does this mean for family law, and people going through divorce and relationship breakdown?
    Capital Gains Tax 
    One of the biggest changes for couples going through divorce is the increase to Capital Gains Tax (CGT). From the end of October 2024, the tax rates will have increased from 10%-18% for basic rates taxpayers, and 20-24% for the higher rate taxpayer.
    This significant rise is likely to impact a wide spectrum of couples who have assets where CGT will be applied upon sale. For example, couples with investment properties, second homes, stocks outside Isas and even collections of jewellery or artwork will be affected.
    The increased rate will mean any assets sold as part of the financial agreement will be subject to more tax. This reduces the overall profit from sale, shrinking the matrimonial pot and therefore how much is available to share between the separating couple.
    Where couples are amid their financial negotiations, it is best to seek expert legal and financial advice to fully understand the effect that this change might have, and where adjustments might need to be made before making a final settlement.
    If the ex-couple has finalised their financial consent order and it has been approved by the court, unfortunately the agreements made within this settlement will be legally binding. Once a financial order is made by the court, it is extremely difficult for it to be amended, so the ex-couple may be faced with less income from yet-to-be sold assets.
    If you are already divorced, with a financial settlement in place, you may be able to make an informal agreement with your ex-spouse based on the updated income you are likely to get from CGT-applied assets. However, your legal arrangement will still stand. If you have concerns, please contact an expert financial adviser.

    Inheritance Tax
    In the weeks leading up to the Budget, the media reported a number of expected changes around inheritance tax. However, the Chancellor announced that inheritance tax rates would continue to be frozen for the next two years.
    Although this does mean no change yet to lower the nil-band rate, the further freeze will mean that an increasing number of people will be subject to greater tax liability as the value of assets increases over time. This therefore means their beneficiary receives less in the way of inheritance.
    Please speak to an expert financial adviser
    Private School VAT
    From January 2025, the VAT exemption currently applied to private schools in England and Wales will be removed, meaning some schools may have to increase their fees. This could well have a direct impact on divorced couples, and those currently negotiating settlements. Where private schools feature, fees should always be included as part of a settlement. However, if these fees rise by 20% because of the removal of the VAT exemption, further negotiation may be required.
    It is important to note that if the rise in school fees means there is not enough money to share between the separating couple, a judge is likely to require that the children be moved out of private education.
    Parents who have sealed agreements will be bound to these, although it may be possible to make an informal arrangement and ask the non-paying parent for more money. Where this is refused or impossible, children may need to be moved into state education.
    Conclusion
    If you are currently going through divorce, please seek expert legal and financial advice to understand the potential impact of the autumn budget on your negotiations.
    If you struggle to make progress in discussions with your ex, mediation and other non-court resolution methods can be very helpful. Talk to an expert family lawyer about your suitable options.
    Useful Links
    How to protect your money during divorce
    Private school fees after divorce
    Do I need a financial settlement?

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      in Family Law

      Marriage Rates Fall Below 50% in England and Wales

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      Marriage rates fall below 50%: more calls for cohabitation reform
      New ONS statistics have revealed that marriage rates in England and Wales are continuing to fall year-on-year. For the first time since comparable records began, the percentage of people over 16 who are married or in a civil partnership has dropped below 50% to 49.4%.
      Solicitor Abi Jones examines what this means and the pressing need for cohabitation reform.
      Relationships and the way we view marriage as a nation is constantly changing but sadly our laws are failing to keep pace with modern family structures. Different types of families like blended, cohabitees and single parent families and even platonic co-parenting are over-taking marriage as more popular ways to have relationships and children.
      However, same-sex marriages have increased, and it is estimated that the number of people in these marriages in 2022 is around 167,000. This has increased dramatically from 26,000 in 2015 but marriage in general continues to decline in popularity.
      It is clear to see that there is an ever-increasing populace of couples who are not getting married or entering into a civil partnership, instead choosing to live together without any of these ‘official’ statuses in place. The ONS figures noted that the increase has reached more than a fifth of over 16s in England and Wales, from 19.7% in 2012 to 22.7% in 2022.
      These statistics from ONS have led to more and stronger calls for reform in this area as marriage rates decline but cohabitation continues to be the fastest growing family type in the UK.
      Cohabitation reform has long been discussed, and an introduction of a Cohabitation Rights Bill that aimed to establish a framework of rights and responsibilities for cohabiting couples however this still needs to take the normal course through Parliament and be subject to scrutiny and parliamentary debate before it can be formed into a law and implemented.  At the Labour Party Conference 2023, Labour MP Emily Thornberry announced Labour’s commitment to reforming cohabitation laws if they win a general election.
      Currently if a couple is cohabiting but not married or in a civil partnership, irrespective of the amount of time that they have been together, there is no entitlement to a share of the other’s wealth upon the relationship breaking down.  It does not matter how the finances were arranged within that relationship, nor does it matter how long the parties have been together. The idea of the ‘common law marriage’ is entirely mythical.
      The reality is that if a cohabiting couple separate, they will have no claim for financial support or claim to share the other party’s wealth upon the breakdown of that relationship.  These couples are often left having very limited rights upon separation and having to potentially wade through more complicated areas of law such as the Trust of Land and Appointment of Trustees Act claims.
      Until such time that there is a cohabiting rights bill and due to the lack of rights and protections afforded to unmarried couples they should consider getting advice from solicitors and potentially enter into a cohabitation agreement.
      Useful Links
      Cohabitation Client Guide
      Stowe Support resources for Cohabitation
      What rights do cohabiting couples have? Watch on Youtube or Listen on Spotify
      Taking control of your finances on separation and beyond with Lottie Kent: Listen on Spotify More

    • 88 Shares169 Views

      in Family Law

      I’m not the ‘breadwinner’ in my divorce

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      ‘Breadwinner’ is a term often thrown about with little consideration for its meaning. Traditionally, the ‘breadwinner’ in a relationship was the man as it was assumed that whilst the husband went out to work, the woman would keep house and raise the children.
      However, as society has moved on and gender roles changed, the breadwinner could be either party, or there may not be one at all. It may also be that most of the money in the relationship has come from one partner, for example from inheritance or the result of house sales or a business.
      So, what happens if you are the lower earner in your relationship? Money worries may be at the forefront of your mind when considering divorce or separation. Questions like ‘Can I afford to live by myself?’, ‘How will I afford divorce?’, ‘What will happen to the house?’ and many more may be concerning you.
      However, if you are not the ‘breadwinner’ in your relationship, you still have a safety net in divorce.
      In divorce, the Court will work from the starting point of a 50/50 split of finances and assets. A financial settlement is an agreement which will iron out financial issues and fairly separate the assets once a marriage has ended.
      In brief, a Court will look at the future income and earning capacity as well as the needs of each party going forward. If you are not the breadwinner i.e. you’re the lower earner or have no income, this will be taken into consideration in the financial settlement.
      However, it is also important to remember that spouses are not automatically entitled to an equal share of their partner’s income.
      Who pays the legal fees?
      One of the first concerns may be about who pays the legal fees in divorce. The general rule is that each partner will pay their own legal costs. The cost of divorce includes the court fee of £593, plus any solicitors’ fees should they be instructed.
      The person applying for the divorce – known as the applicant – will pay the court fee. If the application is a joint one, applicant 1 will pay the fee.
      You can find out more about who pays the legal fees in divorce here.
      Financial Disclosure and Spousal Maintenance
      Financial disclosure happens early on in divorce proceedings, usually through the completion of a Form E, and should be an honest setting out of the finances and assets of the marriage. Once the forms have been filled in, there is time for the ex-spouses and the solicitors to ask questions.
      Providing everything has been disclosed properly, an agreement can then be made on the future needs of each spouse.
      The court will then review the agreement and decide whether it is fair.
      In situations where one spouse has a much higher income than the other, there is likely to be an extended period of financial support, known as Spousal Maintenance. This can be decided between you and your partner, or the court can order the financially stronger party to pay the other a monthly income. It is expected that both parties should have a similar standard of living after the divorce that they did prior to divorce.
      Spousal maintenance is only available for couples who were married and tends to be more common for divorcees who were married for a long time.
      Spousal maintenance is available for both men and women, as it depends on who was the breadwinner in the marriage. Traditionally, men paid women spousal and/or child maintenance. However, social changes and modern-day working lives mean that either the husband or the wife in heterosexual marriages can pay maintenance costs.
      In same-sex marriages, the same applies in that either party can be the breadwinner and will therefore be required to pay the financially weaker party some form of ongoing income.
      Some couples opt for a ‘clean break’, wanting to cut all financial ties with their partner as soon as possible. To obtain a clean break, you must have a financial order approved by the Court, which also prevents your partner making any financial claims against you in the future.
      Pensions
      Pensions are often ignored in divorce proceedings, especially when the individual has sought no legal advice. However, they are one of the most important aspects in the financial part of divorces but can be complicated.
      As with divorce generally, one party is not automatically entitled to an equal share of their partner’s pension.
      Pensions are complicated, particularly so in divorce, so it is important to seek legal advice, especially if you are the lower earner.
      What’s the best option?
      What’s ‘best’ is unique to the individual and their circumstances. The most helpful thing to do is to seek advice from a family lawyer who will be able to guide you through the options and help make that decision.
      The most important thing to remember is even if you are not the breadwinner in your relationship, financial settlements and the court will take this into account.
      If you are separating, but not divorcing, because you and your partner never married, a Separation Agreement is likely to be an option for you. This document, whilst not legally binding, can be used to formally document the division of assets and finances, including pensions as well as child arrangements and other considerations. More