What the Autumn Budget 2025 means for our family law clients

The recent UK Budget brings a number of changes that could have important implications for many of our clients, from those involved in divorce or separation, to clients concerned with child benefit, estate planning, pensions and housing. Here’s a practical guide to what’s new and what you might want to consider for your circumstances.

Key welfare and family-income measures

1. Removal of the two-child benefit cap

One of the headline announcements is that the government is abolishing the “two-child limit” that previously restricted benefit entitlement under Universal Credit and tax credits, so only the first two children in a family qualify. This is potentially very significant for larger families — many clients who previously lost support for a third (or more) child may now become eligible again, which could affect financial arrangements, maintenance planning, or budgeting post-divorce or separation.

2. Minimum wage and general income support increases

From April 2026, the national living wage will rise (e.g. to £12.71 per hour), and the minimum wage for 18–20-year-olds will also increase. This could improve income for lower-paid clients, which may in turn influence maintenance payments, child support calculations or financial settlements.

3. Energy bill support and cost-of-living relief

Households are set to receive a £150 average reduction in energy bills — part of broader cost-of-living support measures. While not strictly “family law,” any reduction in living costs can influence household budgeting, which may matter for separated couples re-negotiating financial arrangements, or for clients on fixed benefits or low income.

Property, estates, pensions — what those with assets should watch

1. New “mansion tax” (high-value property surcharge)

The Budget introduces a new high-value council tax surcharge on properties valued at £2 million or more (rising for more expensive homes). For clients going through divorce or separation, or dealing with property transfers, this adds a new ongoing cost to owning high-value homes — something to factor into any property settlement or post-divorce financial planning.

2. Inheritance tax (IHT) and estate-planning changes

There are significant changes to rules around pensions and estates — notably, for deaths on or after 6 April 2027, unused pension funds and death benefits may be treated as part of a person’s estate for IHT purposes.

This means clients (or their beneficiaries) need to reassess estate planning strategies — particularly where pensions form a substantial part of the estate. Moreover, for business and agricultural assets qualifying under reliefs (e.g. Business Property Relief / Agricultural Property Relief), the Budget retains certain allowances — including a 100% relief on qualifying assets up to £1 million per person, with transferable unused allowances between spouses or civil partners.

For clients with farms, family businesses, or substantial estates, this offers some continued tax-efficient estate-planning opportunities — albeit in a changed landscape.

3. Reduction in some tax-efficient savings benefits (ISA changes, pension contribution limits)

The government is reducing the cash ISA allowance for under-65s (to a £12,000 limit) from April 2027, as part of efforts to encourage investment rather than cash saving. Also, “salary-sacrifice” pension contributions will become less tax-advantageous — pension contributions above £2,000 per month may lose their NIC (National Insurance Contribution) benefit from 2029.

Clients who rely on pension-based planning, or who were using ISAs as part of their financial planning, may want to review their strategies soon.

What this means for family law clients: practical considerations

For a family-law firm like ours, this Budget brings several practical implications for clients:

• Child benefit & maintenance agreements — Clients with more than two children may now have access to more benefits, which can affect financial resources available to each parent post-separation.
• Property settlements & high-value homes — For divorcing or separating couples with high-value property, the new surcharge on high-value homes could influence decisions about whether to keep or sell property, or how to divide assets.
• Estate planning & pensions — For clients with significant assets, farms or businesses, or pensions, the IHT and relief changes should prompt a review of wills, powers of attorney, trusts, and pension nominations.
• Affordability & living costs — For lower-income clients, or those reliant on benefits or minimum wage income, increased wages and reduced energy bills may improve affordability but also may affect means-tested benefits, maintenance calculations or debt handling.

What to watch — what remains uncertain or may need further clarity

• Many of the tax-system changes (ISA adjustments, pension contribution caps, pension IHT changes) won’t take effect until 2027 or later — so clients don’t need to act immediately, but should start planning ahead.
• For the high-value property surcharge, the precise implementation details (valuation thresholds, timing) will matter a lot — and many property-rich clients will want bespoke advice.
• The effect of lifting the two-child cap will vary widely depending on each family’s circumstances — including income, benefits, existing maintenance orders etc.

What we recommend to our clients now

Given the scale and breadth of the Budget changes, we advise:

1. If you have (or expect to have) more than two children: check whether removal of the two-child limit affects your benefit entitlement — especially if in the middle of separation or custody arrangements.
2. If you own a high-value home (or jointly own one with a partner/spouse): get advice on how the new “mansion tax” could affect your long-term costs, particularly if considering property transfer or divorce.
3. If you’re drafting a will, trust, or estate plan, or have significant pensions / business / agricultural assets: schedule a review to consider the new IHT rules and relief-regime changes.
4. If you are on a low or modest income, or relying on benefits or minimum-wage income: consider whether changes to benefits, wages and cost-of-living measures affect ongoing maintenance obligations, support payments or affordability.