This blog is written by the family law team at Scott Bailey LLP
When a marriage or civil partnership ends, one of the most significant and often most stressful challenges couples face is agreeing how to divide their finances. But what does “fair” actually mean in legal terms? The answer is rarely straightforward, and it is almost never the same for two couples. This guide explains how fairness is assessed under in England and Wales, what the courts consider when deciding a financial settlement, and why the outcome always depends on individual circumstances.
What is included in a divorce settlement?
In short, everything is on the table, at least to begin with. Both spouses must provide full and frank financial disclosure of all their assets and liabilities. This covers property, bank accounts, savings, investments, businesses and pensions. Income and outgoings must also be fully declared.
Once disclosure has been made, arguments can be considered about what should ultimately form part of the settlement. If both parties need all available resources just to rehouse themselves and meet the needs of any children, there is little room to quarantine certain assets from the pot.
Where there is more financial flexibility, one argument sometimes made is that a particular asset is “non-matrimonial.” This means it did not arise from the marriage itself, and may include an inheritance received during the marriage, assets brought in before the marriage, or a family business or estate owned by one party. Whether an asset is genuinely non-matrimonial, and how much weight that should carry, is often one of the more contested issues in a financial settlement. Pensions are frequently one of the most significant assets in a marriage and must be included in financial disclosure.
How are divorce settlements calculated?
There is no fixed formula for calculating a divorce settlement in the UK, aside from the Child Maintenance Service formula which applies to child maintenance in most cases. Instead, the court applies a structured framework set out in the Matrimonial Causes Act 1973.
The starting point is always the welfare of any children of the family. Beyond that, section 25(2) of the Act sets out a checklist of factors the court must consider. These factors, and the substantial body of case law that has developed around them, are what guide both solicitors and judges in assessing what a fair outcome looks like in any given case.
What factors does the court consider when deciding a financial settlement?
The Matrimonial Causes Act 1973 lists the following factors:
- Income, earning capacity and financial resources – the court looks at what each party currently earns, the assets each holds, and any realistic potential to increase earning capacity in the future. This includes a consideration of whether it is reasonable to expect a party to take steps to increase their income.
- Financial needs, obligations and responsibilities – this covers current and foreseeable financial needs, including housing costs, debts, and any ongoing responsibilities to children or dependents.
- Standard of living – the standard of living the family enjoyed before the marriage broke down is taken into account, though it is not always possible to maintain this across two separate households after separation.
- Age and length of the marriage -a short marriage between two financially independent people will be treated very differently to a long marriage where finances have been fully intertwined over many years or decades.
- Physical or mental disability – any disability affecting either party’s ability to work or meet their own needs will be factored into the overall assessment.
- Contributions to the family – this covers both financial contributions and non-financial ones, such as raising children, managing the home, or supporting a spouse’s career. The courts treat these types of contributions as equal in principle, meaning a spouse who gave up work to care for children is not considered to have contributed less than the spouse who was the primary earner.
- Conduct – in the vast majority of divorces, conduct plays no part in the financial settlement. The court will only take conduct into account if it is so serious that ignoring it would be clearly unfair. This is a high threshold. Financial misconduct, such as deliberately dissipating assets to reduce what is available for division, is more likely to be relevant than relationship conduct such as an affair.
- Loss of future benefits – where a party loses the right to inherit a pension or other benefit as a result of the divorce, this is something the court can factor into the overall balancing exercise.
Is a 50/50 split automatic in the UK?
No. Equal division is not the automatic starting point in England and Wales, but it is an important reference point.
The landmark Supreme Court case of White v White [2000] established what is known as “the yardstick of equality.” This means that once the section 25 factors have been applied, the court should check its proposed outcome against an equal split to make sure there is a clear reason for any departure from it. The yardstick exists in part to ensure that non-financial contributions, such as years spent raising children, are not undervalued when dividing assets.
So, while 50/50 is not automatic, it is the benchmark against which any settlement is measured, and departing significantly from it requires justification based on the specific facts of the case.
Examples of divorce settlements in different circumstances
Because the section 25 factors are applied to the specific facts of each case, it helps to see how the same legal framework can produce very different outcomes.
Short marriage, no children, unequal contributions
Consider a couple who married in their late thirties, had no children, and separated after four years. One spouse owned a property before the marriage and brought substantially more wealth into the relationship. In these circumstances, a departure from equal division is likely to be appropriate. Arguments could be made that much of the wealth is non-matrimonial, and a split closer to 75/25 in favour of the wealthier party may well reflect a fairer outcome.
Long marriage, children now grown
After a 28-year marriage where both parties worked at various points, raised children together, and built up shared assets over decades, an equal division is often the most appropriate outcome. The length of the marriage and the full intertwining of finances and contributions makes it very difficult to argue that any particular asset belongs more to one party than the other.
One party has significantly lower earning capacity
Where one spouse stepped back from their career to raise children, their earning capacity may be substantially lower than their partner’s by the time of separation. The court will factor this in both when deciding how to divide capital and when considering whether any ongoing maintenance is appropriate, to ensure the settlement reflects the real financial positions both parties will be in going forward.
Please note, these are broad illustrations to give you an idea of the range of outcomes deemed suitable by the court. The outcome in any real case depends entirely on its specific facts, and seemingly small differences in circumstances can produce significantly different results.
Does health or earning capacity affect a settlement?
Yes, significantly. Sections 25(2)(a), (b) and (e) of the Matrimonial Causes Act 1973 all engage directly with this.
A party’s current income and realistic earning capacity are central to the court’s assessment. If one spouse has a much greater earning capacity than the other, this may justify a larger share of capital going to the lower earner, to compensate for the financial imbalance they will face going forward. Similarly, a physical or mental disability that limits a party’s ability to work or support themselves will affect both the capital division and any consideration of ongoing maintenance.
These factors often interact closely. A disability may reduce earning capacity, increase financial needs, and raise the likely cost of future care, all at once. The court’s role is to weigh all of these together rather than considering each in isolation.
For more on how your broader financial circumstances and assets may be affected by divorce, take a look at our guide to protecting your assets in a divorce in the UK.
Why there is no standard divorce settlement in the UK
No two families are alike, and the law is deliberately designed to reflect this. The court has a broad discretion to tailor its approach to the specific circumstances of each couple, rather than applying a rigid formula that could produce unfair outcomes in cases that fall outside the norm.
What the section 25 framework provides is a structured way of ensuring all relevant circumstances are properly weighed, and that the outcome is both legally sound and genuinely responsive to the needs and contributions of the people involved. It is this flexibility, rather than any fixed rule, that allows the court to achieve outcomes that are fair in practice, not just in principle.
Getting advice on your financial settlement
Reaching a financial settlement is one of the most significant decisions you are likely to face during a divorce, and it is important to be properly informed from the outset. Taking early legal advice means you understand your options before any decisions are made and before any offers are accepted or positions become entrenched.
It is also worth being aware that once a financial order has been sealed by the court, it is very difficult to challenge or re-open. For more on timing and the risks of leaving a settlement unresolved, see our guide to time limits for financial settlements after divorce.
Where both parties are open to reaching an agreement constructively, there are also alternatives to contested court proceedings worth exploring. Our mediation services can help couples reach a fair outcome with less conflict and cost, and our experienced divorce and separation solicitors have the experience to guide you through whatever route is right for your situation.
To arrange a fixed fee initial meeting to discuss your circumstances, please reach out to us today.
