UK Budget 2012: impact on divorce and family law

Contains more than the Chancellor’s sarnies

Mr Osborne’s UK Budget 2012 impacts on us all: but here is my kneejerk reaction to the changes that may be relevant for divorce cases,  and family law.  The Budget is portrayed as fiscally neutral but are there any nasty surprises in there for family lawyers and their divorcing clients?

    • Income tax personal allowance threshold is raised. For spouses on low income, working part time, this is a marginal improvement.  The Chancellor claims 2 million people will be taken out of tax altogether.  We will see.
    • Tax benefits, child benefits and housing benefits appear to be linked to CPI instead of RPI which is a clever, cumulative cut in the true value of these payments going forward.  I highlighted the CPI/RPI ruse in a previous post.  Expect lawyers acting for wives to continue to press for their client’s spousal and child maintenance payments to be linked to RPI to mitigate the impact of a realworld devaluation in child benefit and tax credits as the years go by.  Lawyers for the husband may argue the inflation link should be to the lower CPI measure “If it’s good enough for Mr Osborne…”
    • The big headline for Child benefit is threshold at £50,000 and taper up to £60,000.  A parent with 3 children earning £60,000 will lose approximately £2,400 per annum by these changes.  This will need to be factored in to any negotiations on child maintenance payments if an anticipated future pay rise sees the loss of such benefit. 
    • Spousal and child maintenance will continue to attract no tax relief at all to the person making the payments.  The person receiving the payments will not pay tax upon the same. 
    • NewBuy scheme on new build properties up to value of £500,000 could be helpful for individuals who have left a matrimonial home and who need to re-house themselves.  A deposit of between 5% and 10%  will be enough to secure a property instead of the market standard of 20%.  In matrimonial cases where liquid capital is tight, this could be helpful.   
    • Public sector pay is to made ‘more responsive.’   Not clear how this is going to pan out: some commentators say public sector workers in the North of England could find their pay frozen.  Differentials will presumably grow, quite intentionally, between workers in the same jobs but in different parts of the country.  I would certainly want to know whether my client was going to be finding themselves in a ‘more responsive’ part of the jurisdiction if spousal maintenance or child support issues were in question.  If I am acting for the payer of maintenance in those circumstances where the value of their pay is going to be eroded, I would be resistant to agreeing any RPI link at all.
    • VAT exemptions will remain on food, clothes and books.  Anyone raising kids knows just how much the little darlings cost so this is a relief for those on tight budgets receiving modest child support maintenance payments.

That’s it folks.  For now.


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