Financial Settlement on Divorce

What a Financial Settlement Covers

When you divorce or end a civil partnership, the finances are dealt with separately. The divorce itself ends the marriage when the final order is made, but it does not divide your assets or end the financial claims you each have against the other; the financial settlement does that, whether agreed between you or decided by the court.

It covers everything either of you owns or owes: the home and other property, savings and investments, pensions, business interests, debts, income and any maintenance. If you agree how to split your money and property you can usually avoid court hearings, but the agreement only becomes legally binding once the court approves it in a consent order.

This applies to married couples and civil partners in England and Wales. Couples who were never married or in a civil partnership come under different law, covered under unmarried couples and cohabitation.

How the Court Decides: The Section 25 Factors

Section 25 of the Matrimonial Causes Act 1973 requires the court to consider all the circumstances, giving first consideration to the welfare of any child of the family under 18. There is no fixed formula or percentage; the court weighs these factors:

• the income, earning capacity, property and other financial resources each of you has or is likely to have in the foreseeable future, including any increase in earning capacity you could reasonably be expected to take steps to acquire
• the financial needs, obligations and responsibilities each of you has or is likely to have in the foreseeable future
• the standard of living the family enjoyed before the marriage broke down
• the age of each of you and how long the marriage lasted
• any physical or mental disability either of you has
• the contributions each of you has made or is likely to make to the family's welfare, including looking after the home or caring for the family
• the conduct of each of you, but only where it would be inequitable to disregard it
• the value of any benefit either of you will lose the chance of acquiring because of the divorce

Section 25A adds a duty to consider a clean break: whether your obligations to each other can end as soon after the order as is just and reasonable, and whether maintenance should run only for the period the recipient needs to adjust without undue hardship. See clean break orders and spousal maintenance.

Under sections 23 and 24 of the Matrimonial Causes Act 1973, and the equivalent powers in Schedule 5 to the Civil Partnership Act 2004, the court can order periodical payments, lump sums and the transfer or settlement of property. Pension sharing is covered under pensions on divorce.

Disclosure, Evidence and Common Problems

Every settlement rests on disclosure. Where you exchange financial information before any court application, Practice Direction 9A requires it to be full and honest: facts, information and documents that are material and accurate and up to date enough for proper negotiations. In proceedings the duty is enforced through Form E, and it runs until a final financial remedies order is made, so later changes such as a pay rise or an inheritance must also be disclosed.

Form E is verified by a statement of truth, with valuations, mortgage, bank and pension statements, payslips or accounts and debts attached. We use it in a negotiated settlement too, so both sides work from the same figures.

Common problems are late or incomplete disclosure, disputes over the value of a home, business or pension, assets moved or spent before the settlement, and informal deals never turned into an order; an order obtained through fraud or material non-disclosure can be set aside. If you suspect assets are being hidden, see hidden assets and non-disclosure and freezing orders.

How the Financial Settlement Process Works

Most cases follow these stages.

1. Advice: we list the assets, debts, pensions and income on both sides and explain how section 25 applies.
2. Disclosure: you exchange financial statements and documents, and we check the other side's for gaps.
3. Non-court dispute resolution: the court expects you to have tried at least one form, such as family mediation, a private FDR or arbitration, before issuing, unless there are safety concerns or another good reason not to.
4. Consent order: if terms are agreed, we draft the order and the Form D81 statement of information and lodge them with the notice of application. The court cannot approve it before the conditional order.
5. Court application: if agreement is not possible, we issue Form A. The court gives directions at a first appointment, then holds a financial dispute resolution appointment where a judge helps you negotiate, before any final hearing: see financial remedy proceedings.
6. Implementation: once the divorce or dissolution order is final and the financial order takes effect, property is transferred, lump sums paid and any pension sharing annex sent to the scheme.

Court fees are set in law and change over time, so we link the official court fees page rather than quote a figure; people on a low income with little savings may qualify for help with fees.

Making Your Settlement Legally Binding

An agreement between you does not end your financial claims and cannot be enforced as a court order; GOV.UK states that the document recording what you agreed in mediation is not legally binding. Nor does the final divorce order end your financial claims, which can resurface years later. Only a court order that records the agreed terms and, where appropriate, dismisses the remaining claims as a clean break closes them. On a consent order the court can work from the Form D81 information alone under section 33A of the Matrimonial Causes Act 1973, but the section 25 factors are what fairness is measured against.

Because orders cannot take effect until the divorce or dissolution is final, we normally aim for approval between the conditional order and the final order. Under section 28(3), remarrying or forming a civil partnership before applying bars a claim for a financial provision order or a property adjustment order against your former spouse.

Timing also affects tax. For transfers on or after 6 April 2023, separating spouses and civil partners can transfer assets with no gain and no loss until the earlier of the end of the third tax year after the year they stopped living together and the date of the divorce or dissolution order, and with no time limit where the transfer is made under a formal divorce agreement or court order. Take tax advice before you transfer anything.

When Legal Advice Is Especially Important

An approved order is hard to reopen, so take advice before signing, especially where:

• a family business or professional practice has to be valued: see business assets in divorce
• assets are held abroad or one of you lives overseas: see divorce with overseas assets
• a prenuptial agreement or postnuptial agreement must be read alongside the section 25 factors
• there has been domestic abuse, where mediation may be unsuitable and the mediation meeting requirement may not apply
• your right to live in the UK depends on the marriage: that is a separate matter for our family immigration team

If you are in immediate danger call 999; the National Domestic Abuse Helpline is 0808 2000 247.

How RakLAW Solicitors Can Help

RakLAW Solicitors advises on financial settlements from 42 Shad Thames in Southwark, a short walk from Tower Bridge. A free 15-minute consultation lets us understand your position before we set out the options and the cost of each route; our charges are on our family law fees page.

We handle disclosure and valuation, negotiation in whichever forum suits your case, drafting and lodging the consent order or representing you through proceedings, instructing pension actuaries, accountants or valuers where needed. Related topics, from child maintenance to varying an order, are listed on our money and financial settlements hub. Call 0203 345 2000 to book a free consultation. RakLAW Solicitors is SRA regulated, SRA number 8007405.