Divorce Settlements After the Autumn Budget

Part-way through a financial settlement? Changes to business tax relief, property income and borrowing costs could affect the figures your case relies on.

If you are negotiating a divorce financial settlement, the Autumn Budget on 28 October 2026 is a good moment to check that your financial evidence is still accurate. The Budget did not change family law itself, but changes to tax and borrowing can affect business valuations, mortgage capacity and the net value of key assets.

For an overview of what the Budget means for pensions, maintenance and family law more generally, see Henry Venables' article. This guide focuses on what separating couples in financial proceedings, particularly those approaching a Financial Dispute Resolution (FDR) hearing or final hearing, should check before they negotiate.

At Maguire Family Law, we regularly advise clients whose financial circumstances involve businesses, pensions, property portfolios, investments and other substantial assets. Changes to taxation, borrowing costs and the wider economic outlook can affect not only the value of those assets but also the income available to each party and their ability to meet their future needs.

So, what should separating couples be looking out for?

1. Business owners: changes to Business Asset Disposal Relief

One of the more significant announcements concerns Business Asset Disposal Relief (BADR), which can reduce the Capital Gains Tax payable when qualifying business owners dispose of their businesses or shares.

From 6 April 2027, the lifetime limit on qualifying gains eligible for BADR is due to fall from £1 million to £500,000.

BADR is charged at 18% on qualifying gains up to the lifetime limit. Gains above that limit are generally subject to the standard higher Capital Gains Tax rate of 24%.

For example, assuming a business owner has made no previous BADR claims and the entire gain qualifies:

• A qualifying gain of £1 million disposed of before 6 April 2027 could attract Capital Gains Tax of £180,000.
• The same gain disposed of after the reduction in the lifetime limit could result in Capital Gains Tax of £210,000.

That represents a potential additional tax liability of £30,000. In higher-value divorces, where a business may be one of the principal matrimonial assets, this is an important consideration.

However, there is a crucial distinction between the value of a business and the amount a shareholder would actually receive following a sale. A business worth £2 million does not necessarily represent £2 million of readily available matrimonial capital. Tax liabilities, shareholder arrangements, borrowing, liquidity and the practical consequences of extracting capital all require consideration.

Equally, the court will not necessarily deduct hypothetical Capital Gains Tax simply because a business could be sold. The likelihood and timing of a disposal, the availability of tax relief and the evidence supporting any proposed tax liability will all be relevant.

Where a single joint expert accountant has already prepared a business valuation, the parties may need to consider whether the Budget changes affect any assumptions concerning a potential disposal or the net proceeds available. Find out more about how we advise on business assets in divorce.

2. Financial disclosure: is your information still accurate?

One of the fundamental principles of financial remedy proceedings is that both parties must provide full and frank financial disclosure.

This obligation does not simply end once Forms E have been exchanged.

Financial circumstances can change significantly during proceedings, particularly where there is a lengthy period between initial disclosure and the eventual settlement or final hearing.

For example:

• A business may have increased or decreased in value.
• A property may have been sold or revalued.
• Pension values may have changed.
• An individual may have received a bonus, dividend or inheritance.
• Mortgage borrowing capacity may have altered.
• A tax change may affect the anticipated net proceeds from disposing of an asset.

Where changes are material, the financial information previously provided may need to be updated. This is particularly important where parties are negotiating a settlement based on figures obtained many months earlier.

A settlement based on outdated figures may not reflect the parties' true financial circumstances or their future needs. However, this does not mean that every Budget announcement automatically requires fresh valuations or expert reports. The important question is whether a change is sufficiently material to affect the proposed outcome.

3. Mortgage capacity: can both parties still afford to rehouse?

For many separating couples, one of the most difficult issues is deciding what should happen to the family home and whether each party can afford suitable alternative accommodation.

Mortgage affordability is often central to those discussions. The latest economic forecasts highlight continuing pressure on household finances, including inflation and borrowing costs. This can affect the amount a lender is prepared to advance, the monthly cost of borrowing and ultimately the type of property each party can afford.

In financial remedy proceedings, mortgage capacity reports are frequently obtained to establish what borrowing may realistically be available to each spouse.

However, a report prepared six or twelve months ago may no longer provide a reliable picture. Changes to earnings, expenditure, interest rates, lending criteria or existing liabilities may affect affordability.

Consider a couple who have agreed in principle that one party will retain the family home while the other receives a lump sum to purchase another property.

If the party retaining the home cannot obtain the anticipated mortgage, or the other party cannot secure sufficient borrowing to rehouse, the proposed settlement may no longer be workable.

The parties may need to obtain updated mortgage capacity evidence before proceeding to an FDR or final hearing. A settlement should not simply work on paper. It must be capable of practical implementation.

4. Housing needs and the increasing cost of living

The court's approach to financial settlements is governed by the factors set out in section 25 of the Matrimonial Causes Act 1973.

Among the matters the court must consider are each party's financial resources, earning capacity, financial needs and obligations, the standard of living enjoyed during the marriage and the welfare of any minor children.

The Budget does not change these legal principles. Nevertheless, changes to taxation and the wider economic environment can influence how those principles are applied.

For example, a spouse seeking to retain the family home may face increased household expenditure, while the other spouse may require more capital to secure suitable accommodation.

The cost of running two households rather than one is already a significant issue in many divorces. Where resources are limited, the court may have to prioritise meeting housing and income needs rather than achieving an equal division of capital.

This is particularly relevant in cases where the family home represents the majority of the matrimonial wealth. A 50/50 division is not an automatic entitlement, nor will it necessarily produce a fair outcome in every case.

The practical financial consequences of the proposed settlement must be examined carefully.

5. Pensions: looking beyond the headline value

Pensions are frequently among the most valuable assets in a marriage, sometimes exceeding the equity in the family home.

They can also be among the most misunderstood.

As Henry Venables explains in our Budget overview, most unused pension funds and certain death benefits are expected to fall within the scope of inheritance tax from April 2027. This may affect estate planning assumptions where one spouse has substantial pension provision.

However, pensions cannot simply be compared with cash or property on a pound-for-pound basis. A pension with a cash equivalent value of £500,000 is not necessarily equivalent to £500,000 held in a bank account.

Issues including retirement age, tax treatment, pension benefits, investment risk and future income requirements may all need to be considered.

In some cases, a pension sharing order will be appropriate. In others, the parties may consider offsetting pension entitlements against other matrimonial assets.

Where significant pension assets are involved, expert pension advice may be required to establish a fair division. Existing pension reports should also be reviewed where there have been material changes in circumstances or the assumptions underpinning the original calculations.

6. Keeping investment properties: rental income and Capital Gains Tax

From April 2027, the rates of income tax on property income are due to increase by 2 percentage points, to 22%, 42% and 47%.

For individuals who receive rental income, this may reduce the net income available from those investments. This is particularly relevant in divorces involving property portfolios, buy-to-let investments or substantial rental income.

For example, where one party proposes to retain investment properties as part of a settlement, the court may need to consider not only the capital value of those properties but also the income they are likely to generate after tax and expenses.

Capital Gains Tax may also arise on a subsequent disposal, although the availability and extent of any tax relief or exemption will depend on the circumstances.

There are specific rules governing transfers of assets between spouses and former spouses following separation. Those rules can sometimes allow transfers without an immediate Capital Gains Tax charge, but the timing and nature of the transfer remain important.

A transfer under a divorce settlement should therefore be considered carefully before any tax assumptions are made.

7. Approaching an FDR hearing? Check the figures before negotiating

The Financial Dispute Resolution hearing is often one of the most important stages of financial remedy proceedings.

It provides an opportunity for the parties to negotiate a settlement with the assistance of a judge, who gives an indication of how the case might be resolved. Many cases settle at or shortly after an FDR.

However, the effectiveness of that process depends heavily on the quality and reliability of the financial information available.

If a business valuation is outdated, mortgage capacity evidence no longer reflects current lending conditions, or a proposed disposal would result in a different tax liability, the parties may be negotiating on an unreliable basis.

Before attending an FDR, consideration should be given to whether:

• Financial disclosure needs updating.
• Property valuations remain reliable.
• Mortgage capacity reports should be refreshed.
• Pension information is sufficiently current.
• Expert accountants need to address changes to taxation.
• Income needs assessments reflect realistic household expenditure.
• Any proposed settlement remains affordable and capable of implementation.

Not every change will justify additional expert evidence. The court's directions, proportionality and the cost of obtaining further information must also be considered.

Nevertheless, identifying a material issue before the FDR is generally preferable to discovering it during negotiations.

8. What if your case is approaching a final hearing?

The consequences can be more significant where a case is approaching a final hearing.

By this stage, substantial costs may already have been incurred and the parties will ordinarily be working within a timetable established by the court. If a significant financial change arises, it may be necessary to consider whether updated disclosure or further evidence is required.

For example, a business owner may have received an offer to purchase their company, or a tax change may materially affect the net proceeds of a proposed sale.

Alternatively, a party's borrowing capacity may have deteriorated to the point where their proposed housing arrangements are no longer realistic.

These matters cannot simply be ignored because the case is close to trial.

At the same time, parties should not assume that a new Budget provides an automatic opportunity to reopen every financial issue or obtain additional expert evidence. The court will expect parties to comply with directions, act proportionately and identify precisely why any further evidence is necessary.

Late applications can have significant costs consequences and may disrupt the timetable. Early consideration of potentially material changes is therefore essential.

9. What if you have already reached a financial agreement?

A distinction must be drawn between cases where negotiations are continuing and those where a final financial order has already been made.

Where no binding settlement has been concluded, changes to taxation or financial circumstances may be relevant to ongoing negotiations.

However, once a final financial order has been approved by the court, it cannot ordinarily be reopened simply because tax rates, property values or economic conditions have subsequently changed.

There are limited circumstances in which financial orders may be challenged or varied, depending on the nature of the order and the applicable legal principles.

This reinforces the importance of obtaining appropriate financial and tax advice before concluding a settlement, particularly where substantial assets or complex financial arrangements are involved.

10. Getting advice before you agree a settlement

The Autumn Budget is a reminder that divorce settlements do not take place in isolation from the wider financial world. Taxation, mortgage affordability, business valuations, pensions and the cost of living can all influence the outcome.

For some couples, the changes may have little or no practical effect. For others, particularly those with significant business interests, pensions or property investments, the implications could be substantial.

The key is identifying which changes genuinely matter to the individual case.

At Maguire Family Law, we regularly advise clients in complex financial remedy proceedings, including cases involving privately owned businesses, substantial pensions, property portfolios and high-value matrimonial assets.

We also work alongside specialist accountants, pension experts and other financial professionals where their expertise is required. If you are considering divorce, negotiating a financial settlement or approaching an FDR or final hearing, it is important to ensure that the financial evidence and assumptions underpinning your case remain accurate.

For advice on divorce and financial settlements, call Maguire Family Law on 01625 544 650 or contact us online to arrange an initial consultation.

Article by James Maguire, managing director, Maguire Family Law.

This article provides general information about financial remedy proceedings in England and Wales and the Autumn Budget announced on 28 October 2026. It is not a substitute for legal, financial or tax advice. Some Budget measures are subject to legislation and implementation.