The 2025 Autumn Budget introduced a series of reforms that will shape how families manage their finances going through separation or divorce; some of these changes carry significant strategic implications.
While many headlines focused on support for lower-income families, the Budget also introduced reforms to the taxation of wealth, property income, and investments. These shifts mean that separating couples — particularly those with complex assets — should take specialist advice earlier and plan their financial arrangements with even greater precision.
1. Increased tax focus on wealth and asset income
A central theme of Budget 2025 is increased taxation on income derived from assets — including investment portfolios, rental properties, and other passive income streams.
Why this matters during a divorce
- Asset-related tax liabilities can directly influence the value of a settlement.
- Transfers of investment assets or property between spouses — traditionally tax-neutral — may now carry more considerations around future tax exposure.
- Individuals with diversified portfolios will need to evaluate the tax efficiency of keeping or trading certain categories of assets, especially where maintenance obligations are involved.
The opportunity
This is the time to revisit tax planning, both before and during a divorce. With careful structuring — including trusts, corporate vehicles, and pension rebalancing — it is often possible to preserve value and reduce future tax exposures.
2. Property & investment portfolios require new strategy
Reforms affecting property income and the broader taxation of asset-derived wealth mean that real estate portfolios, buy-to-let interests, and investment properties require closer evaluation during a divorce.
Potential impacts
- Rental income may attract different tax treatment, affecting the affordability of ongoing financial commitments.
- The timing of asset disposals, particularly high-value properties or shares, becomes more important.
- For couples with international property portfolios, cross-border tax rules must be coordinated with the new UK regime.
Practical takeaway
During negotiations, it’s no longer just about who gets what, but who can most efficiently hold a particular asset class going forward, and it will be important to work in tandem with your family lawyer and other professional advisers.
3. Pension & long-term wealth planning take centre stage
The Budget includes reforms to pensions and savings support which, in turn, affect long-term financial planning during divorce.
For individuals with substantial pension wealth, this means:
- Greater scrutiny on how pensions are shared or offset.
- Increased importance of actuarial valuation to ensure fair outcomes.
- More strategic use of pensions as part of overall settlement structuring.
Given the complexity, specialist advice is highly recommended when reviewing pension division and post-divorce retirement planning.
4. Tax threshold freezes: a slow-burning impact
Personal tax thresholds remain frozen — effectively pulling more individuals into higher tax bands over time (“fiscal drag”).
For some individuals, this means:
- Increased exposure to higher tax rates on both earned and investment income.
- Potential increases in effective maintenance obligations.
- More need for forward-thinking cash-flow planning post-divorce.
This change subtly but meaningfully affects long-term affordability and financial planning for both parties.
5. Changes to family benefits: relevance for blended and larger families
Although primarily aimed at lower-income families, the abolition of the two-child limit for Universal Credit and related child benefits has indirect implications for separated parents, blended families, and households with childcare responsibilities split between homes.
For clients with more wealth, the relevance is twofold:
- It may affect negotiations where one parent has significantly lower income or earns irregularly (e.g. entrepreneurs, directors, or individuals with fluctuating asset income).
- Where school fees, childcare, and lifestyle expectations are high, these changes may form part of broader discussions about child maintenance and living arrangements.
6. The landscape is more complex — early planning is essential
Budget 2025 creates a more complicated financial environment for separating couples, particularly those with:
- High-value property portfolios
- Significant investment income
- Businesses or shareholdings
- Trust structures
- International assets
- Large pension pots
Strategic advice at the earliest stage is crucial. The way assets are valued, shared, or retained now carries different long-term consequences than it did even a year ago.
Comment
At Nelsons, we have experience acting for high-net-worth individuals — including entrepreneurs, professionals, landowners, and clients with multijurisdictional assets — we advise on:
- Complex financial settlements
- Divorce involving business or trust assets
- Wealth and tax-aware separation planning
- Child maintenance and lifestyle provision for children
- Pre- and post-nuptial agreements
- Mediation and discreet dispute resolution, including collaborative law and Resolution Together
If you are considering separation or are in the early stages of a divorce, the Budget 2025 changes make early strategic advice more important than ever. A well-planned approach not only protects your wealth — it protects your future options.
How can we help?
Emma Davies is a Partner in our Family Law team, which is ranked in Tier One in the independently researched publication, The Legal 500.
Emma specialises in divorce and financial settlements, which involve complex issues and substantial assets. She also advises on pre- and post-nuptial agreements, cohabitation agreements and separation agreements, along with private law Children Act disputes. Emma is a qualified collaborative law and Resolution Together practitioner.
If you need further advice on the subjects discussed above, please contact us and we will be happy to discuss your circumstances in more detail and give you more information about the services that our family law solicitors can provide, along with details of our hourly rates and fixed fee services.
For more information or advice, please call Emma or another member of our team in Derby, Leicester or Nottingham on 0800 024 1976 or contact us via our online form.
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