Budget 2025: What Families Need to Know When Planning Separation or Divorce

The 2025 Autumn Budget brings several tax and financial reforms that could significantly affect separating couples, especially those with complex assets.

Emma Davies, partner and family law specialist at Nelsons, highlights that these updates make it even more important for families to plan ahead. Below Emma outlines the key changes and what they mean for those preparing for separation or divorce.

November’s 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 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 specialist advice and careful planning it is possible to preserve value and reduce future tax exposures.

2. Property and 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 affordability of ongoing financial commitments.
• Timing of asset disposals, particularly high-value properties or shares, becomes more important.

• 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 and long-term wealth planning take centre stage

The Budget includes reforms to pensions and savings support including caps on salary sacrifice pension contributions which means these schemes will become less tax advantageous.  In turn, this affects long-term financial planning during divorce as the ability of divorcing couples to rebuild their pensions post-divorce needs to be considered and may affect how settlements are structured.

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

The Autumn 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.

Emma emphasises that, despite the added complexity, with the right advice families can still make informed and confident decisions about their future. If you’re considering separation or are in the early stages of divorce, Nelsons’ family law team can help you navigate the Budget’s implications and protect your long-term financial position.

To find out more about Nelsons’ family team, please visit: https://www.nelsonslaw.co.uk/personal-legal-services/family-law-solicitors/

For more information, please contact Huma Mian or Niamh Tracey at Cartwright on 0115 853 2110.

About Emma Davies

About Nelsons: 

Nelsons was established in 1983 and provides support to businesses, individuals and families with their legal and investment needs. Nelsons’ experience and depth of resource has also enabled them to offer services to other solicitors through Fusion Legal – a mutually-beneficial referrals and support network for law firms. The firm is recognised by the leading, independently researched Legal 500 and is recommended by them in more than 20 practice areas. The firm is recommended by Chambers and Partners and also features in The Lawyer’s UK 200 Annual Report of the UK’s largest 200 law firms. Nelsons has offices throughout the East Midlands in Nottingham, Leicester & Derby