How will the government's Autumn Statement 2022 impact separating couples?
Jeremy Hunt’s Autumn Statement 2022 set out a raft of policies aimed at both stabilising the economy and dealing with inflation and the cost of living crisis.
If you are divorcing or separating, the statement presents new challenges for you and your family, at a tough time when you are already dealing with the emotional and financial trauma of the break-up of your marriage.
In this blog, I will go through five areas which may have an impact on your financial settlement as part of your divorce.
When you separate, you need to agree on how to divide your money, property and any investments and pensions, so it’s natural that changes in the economic climate will alter how you look at options and financial arrangements.
Below, I have set out some things that changed in the autumn statement or mini-budget that you might need to think about as you make your agreements. If you’re not sure about any points or would like more guidance, you should seek expert financial or tax advice on these areas before concluding your divorce settlement.
1. Capital gains tax allowance (CGT)
Capital gains tax is the tax paid when you sell an asset such as company shares or a second home. Last week the Chancellor announced a reduction in CGT allowances (that’s the amount of money you can gain before being taxed) from £12,300 to £6,000 in April 2023 and then £3,000 a year later.
Usually, when you divorce, taxes are taken into account and assets are valued net of tax if they are to be sold. As part of your divorce, you may need or wish to sell assets impacted by CGT, in which case this change may impact your settlement. You should speak to a specialist tax advisor and ask them to calculate any tax that is likely to arise as a consequence of your divorce settlement.
2. Stamp duty Land Tax (SDLT)
In September, the government said a cut SDLT in England and Northern Ireland for some house buyers would be permanent. This is no longer the case. The price at which stamp duty is paid was doubled from £125,000 to £250,000 (£425,000 for first-time buyers) and discounted stamp duty for first-time buyers applied to properties up to £625,000, rather than £500,000. The chancellor has now introduced a deadline, which will see these cuts reversed at the end of March 2025.
This means for couples needing to rehouse themselves as part of their separation, will need to consider the impacts of these changes in terms of their divorce timeline.
3. Increase in state pensions
State pensions will increase from £185.15 a week to £203.85 as of April next year. This will have an impact on financial agreements in terms of whether your ‘needs’ are being met.
For information on pensions and divorce read our guide which explains what types of pensions there are and when they might be shared as part of a financial settlement.
4. Rise in benefits
There will be a rise in benefits in line with the inflation rate by 10.1% (as of April 2022) as well as one-off means-tested benefit payments for households (including individuals on disability benefits).
This will mean that fewer people will be able to claim help with court fees as benefits are rising which may take them over the threshold, which hasn’t increased with inflation.
We have a court fee calculator you can use to check whether you might be eligible for money off given any changes in your personal situation.
5. Increase in inflation
Perhaps the greatest impact you will see is the increase in inflation. With inflation now sitting at around 11.1%, whether you are paying or receiving child maintenance or spousal maintenance you may need support to agree to, or renegotiate your agreement. Whilst costs are increasing, putting the receiving parent under tremendous pressure, it's also true that salaries are not increasing at the same rate, making it difficult for the paying parent, leaving families squeezed and in conflict. We are finding lots of people asking for help to negotiate this tricky space. If you are in this situation please book a one-off coaching session rather than fall out.
Being pragmatic, and willing to compromise, will go a long way in helping you cope with the upcoming changes to the financial landscape and its impact on your financial arrangements. We know this is easier said than done which is why we recommend a facilitated conversation.
3 Tips for keeping the cost of agreeing low:
If you’re able to be amicable, you will reach an agreement more quickly and spend less in the process
Work out what you can agree on and what you may need some extra support agreeing
Look to the future - does this agreement factor in life events in several years' time and have you considered all your options?
If you need any help or support with understanding your options during this time, you can book a one-off coaching session with a specialist.