What happens to your finances when you get divorced?

Published 19 June 2025

When you get divorced, emotions and the information you are getting can feel overwhelming. You want to ensure you get your fair share to rebuild your new life. Suddenly, everything from your home to your pension is up for negotiation.

But do not worry. With the right support team and advice, smart planning, you can come out feeling in control.

Understanding the financial foundations of divorce

Initial financial steps & gathering documents

First things first: get your paperwork in order. Think bank statements, mortgage details, pension values, loan agreements, and tax returns. It may not be glamorous, but it is vital. You cannot split what you do not know or fully understand. Having a clear financial picture helps you plan your next move and avoids nasty surprises down the line.

You may need to complete something called a Form E, to be exchanged with your ex. In there, you will need to put down details of what you property, pensions, savings and debt you have, in addition to what income and outgoings you have. A financial planner can help you gather this information and a solicitor can help you complete the form accurately.

Assessing assets and debts: what are matrimonial or marital assets?

In the UK, marital property usually includes anything gained during the marriage. Yes, those joint savings and your dream kitchen count. Inheritances that you are expected to receive but your loved one is still alive are not considered, since it is not guaranteed that one would get this in the future.

Personal gifts, pre-marriage assets, and inheritances that have already been received may stay yours, unless they have been mixed with joint money or they are needed to ensure the you or your ex’s financial needs are being met. It is not always black and white. For example, if you inherited a house but used joint funds to renovate it, it might now be considered part of the marital pot.

Temporary financial arrangements and the cost of divorce finances

While the legal stuff is being worked out, life (and bills) go on. You might need a temporary budget for now, covering rent, food, solicitor fees, and even double household costs. Some couples agree to split certain bills until things are official. If that sounds tense, it often is. But having a short-term money plan helps avoid conflict and keeps you from draining savings too soon.

Dividing your shared assets: the financial settlement

Marital vs. separate property in the UK

UK divorce law aims for fairness, not a 50/50 split. What’s “fair” depends on your situation and each of your needs. As mentioned earlier, marital assets, things bought or built during the marriage, are up for negotiation. But anything built before or inheritances for example,might stay yours. Unless, of course, it got tangled with joint money or are needed to ensure you or your ex financial needs are being met. That is where it gets tricky.

Common assets: from the house to investments

Common assets include your home, savings, pensions, investments, cars, and even businesses. Everything needs to be valued properly. Guesswork will not cut it. Sometimes these get split down the middle. Other times, one person keeps more of one thing in exchange for less of another.

Factors influencing divorce property division

No two divorces are the same. The court looks at the length of your marriage, who earned what, both who looked after the kids, both of your earning capacities, and who needs more support going forward. Even if you have agreed outside court, the judge still wants to know it is fair. If kids are involved, their needs take top priority.

Pensions and retirement funds: what happens to pensions on divorce?

Why pensions matter in divorce

Pensions are often the second largest asset after the family home, yet they are sometimes overlooked due to their complexity. In United Kingdom divorce law, pensions are considered joint assets. While they are treated separately from other marital assets, they should still be included in the overall financial settlement. Understanding your rights and options is essential for protecting your long-term financial security.

How are pensions divided?

There are three main ways pensions can be dealt with in a divorce:

• Pension sharing: A court may issue a pension sharing order, transferring a portion of one spouse’s pension pot to the other. This is often the most straightforward arrangement, as each individual ends up with their own pension pot to manage independently. This allows both parties to make a fresh start without future financial involvement with one another.

• Pension offsetting: Instead of dividing the pension itself, one spouse retains the pension while the other receives a larger share of different assets, such as the family home or savings, to create a fair settlement. This method can result in a complete financial separation, but it is only appropriate if there are sufficient non-pension assets to offset the value fairly.

• Pension attachment (Earmarking): This is the least common method. It involves one spouse receiving a portion of the pension income when it is eventually paid out. However, this option does not provide a complete financial break, as the recipient remains financially dependent on the pension holder. Payments are also subject to the timing and circumstances of the pension holder, and could cease entirely if the pension holder dies before retirement.

What should divorcing couples consider?

• Full disclosure: All pensions must be fully disclosed during the divorce process. Concealing pension information can result in future legal claims and complications, even many years after the divorce has been finalised.

• Accurate valuation: Defined benefit pensions, such as final salary schemes, can be particularly complex and should be valued by a qualified professional or actuary. These pensions provide a guaranteed annual income that typically increases with inflation and may be significantly more valuable than they initially appear.

• State pensions: These are frequently overlooked. Although state pensions generally cannot be shared through a court order, differences in National Insurance contribution records between spouses can affect long-term financial security. If one partner is entitled to a full state pension and the other is not, this discrepancy should be considered during the settlement.

• Marriage length and contributions: In England and Wales, pension contributions made before the marriage may be included in the settlement, particularly in longer marriages. In Scotland, only the portion of the pension accrued during the marriage is usually considered.

• Legal advice: Because pensions involve many legal and financial complexities, it is strongly recommended to seek professional advice. Legal and financial advisers with experience in divorce cases can help ensure that you understand your entitlements and avoid making decisions that could negatively affect your future financial stability. Many professionals offer a free or no-obligation initial consultation to help you explore your options.
  

What happens to businesses in divorce?

Why business assets matter in divorce

Business assets are usually treated as part of the marital assets during divorce, even if the business is owned by only one spouse. This means they can be considered in the financial settlement. The court will assess the value of the business, typically using a professional valuation, and take into account several factors, such as:

• When the business was acquired

• The contributions of each spouse, both financial and non-financial

• The length of the marriage

Although the business itself does not usually have to be broken up, its value forms part of the overall settlement. The court’s goal is to reach a fair outcome based on the couple’s specific circumstances.

How business assets can be divided

There are several ways to divide business assets in a divorce:

• Buy-out: One spouse buys the other’s share of the business.

• Offsetting: The business owner keeps the business but gives the other spouse a larger share of different assets, such as the family home or pension.

• Sale of the business: In some cases, the business may be sold outright or at a later date, with the proceeds divided.

• Transfer of shares: Ownership shares may be transferred between spouses.

• Continued co-ownership: In rare cases, ex-spouses may continue to run the business together. This requires strong legal agreements to manage responsibilities, profit-sharing, and exit strategies.

The court will not automatically split the business 50/50. Instead, it will look at factors such as each party’s role in the business, any special contributions, and their future financial needs.

Tax implications of your divorce financial settlement

Capital gains tax, income tax, and support payments

Capital Gains Tax (CGT) simply put is tax on profit when you sell an asset.

When divorcing, you can usually transfer assets to your ex without triggering CGT. This ‘no gain, no loss’ relief applies for up to three tax years after you stop living together, or until the divorce is finalised.

If transfers are made under a court-approved financial order, this relief has no time limit. You may also be able to claim Private Residence Relief on the family home, depending on your situation.

Child and spousal support are tax-free, but other transfers may have tax implications. Expert legal and tax advice is essential to avoid surprises.

Changes to filing status and seeking tax advice

In the UK, a new tax year starts every 6th April. If you have separated before then, you might be considered single for that year. Update your tax codes. Consider speaking to a tax expert, especially if property or shares are involved. A little advice now could save a big bill later.

Navigating debt division and your credit score

Joint vs. separate liabilities: who pays what?

Your mortgage does not vanish just because love did. If both names are on the paperwork, you are both still liable. The court might assign responsibility, but banks would consider both of you liable, if both of you are named. That is why it is key to handle joint debts quickly.

Strategies for managing and dividing debt, including car finance

You have got options. Consider paying off what you can now, or refinancing loans into your own name if possible. Or, if the car you financed together is not worth keeping, sell it and split the value. Check your credit report too. Divorce can be exhausting enough. Do not let it wreck your credit score as well.

Spousal maintenance and child maintenance

Understanding spousal maintenance and potential calculation

Spousal maintenance is support paid to help one partner stay afloat post-divorce. It is not automatic. You will need to show there is a genuine need. If one person was the main earner, they might need to pay the other monthly support. The courts weigh standard of living enjoyed, income gaps, and whether someone can realistically work. It is a balancing act, not a punishment.

Factors determining spousal support and duration

The longer the marriage, the more likely support will be ordered, and for longer. The court also looks at the age and job prospects of the person asking for support. If someone gave up a career and therefore earning capacity to raise children, that is factored in. Some support lasts a few years. Others go until retirement, death, or remarriage.

Child support and maintenance obligations: calculation and end dates

Child maintenance is based on the paying parent's gross income. In the UK, the Child Maintenance Service (CMS) has a formula with no guesswork needed. Payments usually continue until the child is 16, or 20 if they stay in full-time education. The parent with day-to-day care receives the money. It should cover essentials like food, clothes, and housing.

Building your financial future post-divorce: budgeting and planning

Creating a new budget and managing expenses

You are starting a new chapter. Build a budget to match. Track your income, cut what outgoings you can that do not give you happiness, and build an emergency fund. Use tools to stay organised and reach out to a financial planner to map out your new life. Knowing where your money goes is power. And you have likely already had enough surprises.

Long-term financial planning for women

Post-divorce is the perfect time to review everything. Check your pension contributions, adjust your investment goals, update your will, and review insurance. Use it to create financial freedom on your own terms.

Seeking professional financial and legal guidance for divorce

The value of a divorce financial adviser & divorce financial planner

I refer to myself as a financial adviser and a Chartered Financial Planner. This is because most people do not know what a financial planner is, but have heard of a financial adviser. But there are key differences. Read more about it in my earlier blog here.

A divorce financial planner is not just for the rich. During your divorce, they help you understand your options, weigh up settlements, and model how your future might look. That is peace of mind when everything else feels uncertain. Think of them as your financial compass or satnav during divorce detours.

After your divorce, they can help you manage your pension sharing orders or divorce settlements, to ensure it aligns with your new life.

Working with solicitors and accountants for your divorce

Your solicitor will handle the legal side, protecting your rights, helping you negotiate, and filing the paperwork. An accountant can value businesses, plan for tax, and keep your financial picture clear.

The role of a divorce coach

While not a legal or financial expert, they have been valuable in helping my clients with the emotional and practical side of divorce. From reducing conflict and improving communication to staying focused and preparing for key meetings, a coach supports your mindset and wellbeing throughout the process.

Building your support team

Together, with your financial planner, lawyers, accountants and coaches form your support squad. Do not go it alone if you do not have to as they can add more value to your future than their costs, particularly during what can feel like an overwhelming time. You can find professions in these areas that also specialise in divorce through the Resolution website.

Final thoughts: planning your finances after divorce

Whether you are splitting assets, sorting out support, or just figuring out your next financial step, clarity is key. Your future stability starts with a solid plan. Working with a divorce financial planner will allow you to build a financial strategy that supports the new life you want to create.

Financial peace of mind might feel out of reach right now, but it is absolutely possible. All it takes is a clear plan, expert support, and the courage to begin again.

☕ Let’s have a no-obligation Clarity Call and talk about how to take back control of your money, and your future.

Your partner in financial confidence,

Shalini Kanap

Resolution member & Treasurer of Resolution Merseyside

P.S. If you want to learn more, explore some of my other helpful reads:

• Do Financial Planners help with budgeting? Taking control of your finances

• Financial advice for women going through divorce: What you need to know

• What do Financial Advisers do? How they secure your financial future in the UK

• Take control of your finances and your future: Divorce Financial Advice in Liverpool
  

Frequently asked questions

What am I entitled to financially in a UK divorce?
It depends on your marriage length, assets, income, and any children involved. The goal is fairness and considering each other’s needs, not a strict 50/50 split.

Do I have to pay my spouse’s debts after divorce?
If the debt is in joint names, you could still be liable, even if the court assigns it to your ex. Always check with lenders.

How are pensions divided in a UK divorce?
Pensions can be split through a pension sharing order or offset against other assets. Each option has long-term implications. It is recommended that you seek financial advice to understand the impact to future you.

What happens to the house during divorce?
You can sell and split proceeds, buy out your ex’s share, or transfer ownership. Your solution depends on financial practicality and family needs.

💬 Get in touch today to start your personalised financial planning journey.

Let’s build a financial path that fits your life.

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