Article written by Mandeep Clair, Family Solicitor
Statistics from the Ministry for Justice reveal a notable 20 percent surge in divorce applications within a year of the implementation of the Divorce, Dissolution and Separation Act (2020) – ‘no-fault divorce’. Yet, despite the simplified process, couples navigating the legal stages of separation still encounter a myriad of challenges.
Heralded as a revolutionary shift for separating couples, the Divorce, Dissolution and Separation Act sets out to streamline the divorce process. This legislation aimed to mitigate confrontation, allowing couples to dissolve their marriage by citing irretrievable breakdown instead of necessitating blame for adultery, desertion, unreasonable behaviour, or enduring a period of separation as previously required.
Importantly, the change was welcomed as a major advance for those looking to leave abusive marriages. Now, victims of domestic abuse can take action knowing the application cannot be contested, make allegations requiring investigation or provide supporting evidence.
The reforms marked a significant milestone in family law, with the potential to reduce the emotional strain on couples going through marital breakdowns. However, a year on, the bigger picture is a mixed outcome for those directly impacted by the process.
How simplification creates complication
The attraction of what has been promoted as ‘digital divorce’ via an online portal, together with the removal of apportioning blame may seem like a quick-fix, low-cost solution to what was previously a complex procedure.
Certainly, that’s the promise offered by an internet search for divorce: one top result promises: ‘complete and submit the court forms yourself. This will be the cheapest option as you only have to pay the court fees’.
However, getting divorced involves not just a legal process to end the marriage: in most circumstances, it will require negotiation and agreement on everything from how any children may be cared for, through bank accounts, business and pensions, to where each partner will live once all things financial have been mediated.
While the new process undoubtedly makes it much easier to take a DIY route to ending of the marriage itself, very real problems may arise if the divorce is finalised without tackling and making agreement on all these other aspects.
Claims over finances cannot be resolved by personal agreement, even if it seems very amicable at the time. Without a financial order approved by the Court, either party can make a financial claim on the other, long after the marriage has ended.
Lack of advice may also leave one side open to exploitation by the other, either because they do not realise what they may be entitled to in a fair division of assets, or they may not even know what assets their former spouse owns. Full disclosure through the process of drawing up an application for a financial order, combined with independent advice and oversight in asking the Court to make a decision, can help overcome these issues.
Furthermore, lack of knowledge affects not just those taking the ‘do it yourself’ route. Increasing numbers of online operators have entered the digital divorce market who may not have the expertise to guide couples along the journey. The Competition and Markets Authority (CMA) has begun a review of digital legal services, including ‘quickie’ divorces, because of concerns over unregulated advisers.
The CMA say that while alternative providers can be innovative and sometimes cheaper, it found “misleading claims about both the simplicity of the process and prices” from those offering divorce, leaving consumers “unclear about what they can be helped with or what they are paying for”. The CMA highlighted “inadequate quality of service, including firms using the wrong forms, entering incorrect details, sending papers to the Court late”.
The new divorce deal breaker
In recent years, financial negotiations have focused increasingly on the value of the family home and the challenge of providing a roof for each partner in the face of soaring house prices, particularly when both homes need to be big enough for children to spend time living with each parent. Alongside pension sharing, business assets and inheritances, property remains the big issue, but over the last year an unexpected bargaining chip has been the mortgage deal on the family home.
Following steep rises in interest rates, the cost of borrowing may lead to inequality between separating spouses if one is holding on to a long-term low interest rate. Combined with tougher affordability tests from lenders, it may lead to one spouse asking for compensation for the higher cost involved or for a bigger share of the pot to enable an equivalent purchase. Some may negotiate with the lender to have the existing deal split between them, but this is up to the lender and their borrowing terms.
Tax changes give breathing space
Alongside the challenges, there is at least some good news, with a valuable change in the way divorcing couples are taxed. Since April 2023, there has been a new timetable on Capital Gains Tax reliefs when couples break up.
While together, transfers and disposals between a couple can be on a ‘no gain, no loss’ basis, and previously the relief was also allowed during the first tax year of any separation, but once outside that first tax year, matters became complex and could involve tax charges on the spouse or civil partner who was transferring the asset.
Now, the new rules give separating couples up to three years after the year they cease to live together in which to make a no gain, no loss transfer, with no time limit when the transfer is part of a divorce agreement covered by a court order.
With financial matters becoming increasingly complex, combined with delays in the Courts, many divorces are taking longer to complete, so this change is important and valuable for many couples.