How the recent Budget affects separating couples

Posted 15th July 2015

Written by Newtons Family Team

When couples are separating and divorcing, financial matters are also considered.

Budget News

There are several parts to the recent Budget that will affect each party’s financial circumstances and therefore the likely outcome of the matrimonial proceedings.  The main influential factor is in relation to income.

Whilst disposable income will increase due to increased tax brackets, there are to be cuts to welfare payments for working families with more than two children which is one of the key factors of the Budget.  In most circumstances when a couple separate it is usual for the children’s primary carer and/or the lower earner to be in receipt of tax credits.  This means that the receipt of tax credits are a great supplement to the receiving party’s income and can reduce the amount or the need for spousal maintenance payments.

Where a party is heavily reliant on tax credits, the Court may need to start looking towards the higher earner to make maintenance payments towards bridging the gap.  This is not something that would be plausible where both parties are lower earners.

The new National Living Wage, starting at £7.20 per hour from April 2016 and increasing over the next four years to reach £9.00 per hour by 2020, may go a small way to assist with the lack of tax credits but it is unlikely to be sufficient.

The increase in free child care from 15 to 30 hours per week from 2017 may help to provide the main carer with some flexibility for working or to increase their hours which they may not have been able to do before therefore providing them with an increase in their income.

In addition, if the main carer for the children remains in the family home and it is agree for this to be sold once the children finish full time education, the occupier would be allowed to rent a spare bedroom after divorce and receive £7,500 tax free rental income next year.

Whilst there is some good news that will hopefully assist in increasing parties’ disposable income, those separating couples that were heavily reliant on a tax credits are going to struggle and any financial settlement subsequent to the divorce will need to reflect the changes ahead.  It is important that you speak to a solicitor who can provide you with the options available and how the gap in incomes can be diminished where possible…

If you wish to discuss these or any other family law issues, please contact the Family Team at Newtons Solicitors.  We offer a first class approach to what can be a difficult and upsetting time.  Please note we also offer a free half an hour confidential appointment and can be flexible when needed.  We have car parking and wheelchair access.