Divorce is not only an emotional process but also a financial one. For many couples, the most stressful part is deciding how money, property, and assets will be divided. In England and Wales, there is no automatic rule that everything is split equally. Instead, the law focuses on fairness based on individual circumstances.
Understanding how financial settlements work can help you make informed decisions, avoid costly mistakes, and protect your future. This guide explains how finances are divided in a divorce, what the court considers, and how agreements are legally finalised.
How the court decides what is fair
When a couple divorces, the court has wide discretion to decide how finances should be divided. The main law that governs this is the Matrimonial Causes Act 1973. Under this legislation, judges must consider a range of factors to reach a fair outcome.
The first priority is always the welfare of any children under the age of 18. Their housing and financial needs come before everything else.
The court then considers the following:
• The income, earning capacity, property, and financial resources of each spouse
• The financial needs, obligations, and responsibilities of each party
• The standard of living enjoyed during the marriage
• The age of each person and the length of the marriage
• Any physical or mental disability
• Contributions made to the family, including non financial contributions such as childcare
• The conduct of either party, but only in very rare cases
These factors are applied to reach a settlement that meets needs and achieves fairness, rather than strict equality.
What counts as matrimonial assets
In most divorces, the court distinguishes between matrimonial and non matrimonial assets. Matrimonial assets are those built up during the marriage, regardless of whose name they are in. This can include the family home, savings, pensions, investments, and business interests.
Non matrimonial assets are those owned before the marriage or received as gifts or inheritance. However, even non matrimonial assets can be shared if they are required to meet the other person’s needs.
Common assets that may be divided include the family home, savings and bank accounts, pensions, business interests, vehicles, and investments.
Pensions are often one of the most valuable assets in a marriage. The court can make a pension sharing order to divide future pension income fairly.
Debts are also taken into account. This includes mortgages, loans, and credit cards. Responsibility for debts is usually shared, even if only one name appears on the account.
How financial agreements are finalised
Most couples are encouraged to reach an agreement outside of court through negotiation or mediation. This is often faster, less expensive, and less stressful.
Once an agreement is reached, it must be made legally binding by applying for a financial consent order. Without this, either party can make future claims, even years after the divorce.
If no agreement can be reached, the court will decide and make a financial order. This can include property adjustment orders, lump sum payments, spousal maintenance, pension sharing, or a clean break order where possible.
A clean break order ends all future financial claims between the parties. However, it is not always appropriate where ongoing support is needed.
At Penerley, we understand that financial uncertainty can be overwhelming. We provide clear guidance and professional support to help you navigate the process with confidence and clarity.
If you are going through a divorce and need support with financial arrangements, contact Penerley today to discuss how we can help you move forward securely.
