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Why Claimants Pay 25% of Their Compensation Toward Legal Costs

By Ian Morris | Updated August 8th, 2024

196 questions have been answered on this subject - ask us your question

Quick Answer: Since April 1st, 2013, successful personal injury claimants are required to contribute up to 25% of their compensation settlement towards legal costs. This change was introduced by the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO), which altered the way No Win No Fee claims operate in the UK.

Prior to March 31st, 2013, claimants pursuing personal injury compensation on a No Win No Fee basis retained 100% of any settlement awarded to them, with no deductions. If they lost their claim, they paid nothing. This system required third-party insurers to fully cover legal costs, insurance costs, and pay compensation for injuries and losses. However, the landscape of personal injury claims changed dramatically with the introduction of the LASPO Act 2012, often referred to as the Jackson Reforms.

The LASPO Act 2012: A Game-Changer

What Changed?

Claimants now contribute up to 25% of their compensation towards legal costs
Solicitors can no longer recover success fees from losing defendants
After The Event (ATE) insurance premiums are no longer recoverable from defendants

Why Were These Changes Implemented?

The government introduced these changes in response to pressure from the insurance sector, which argued that it was costing them too much. They claimed solicitors were charging excessive fees and warned of a perceived “compensation culture” in the UK.

Impact on Claimants

Financial Implications

Up to 25% deduction from compensation settlements
Responsibility for paying ATE insurance premiums if the claim is successful

Positive Aspects

No Win No Fee agreements still protect claimants from paying if they lose
Claimants still receive a significant portion of their compensation

The Insurance Industry’s Perspective

The insurance industry claimed the cost burden they faced when losing a claim was too great, and that solicitors were greedy, charging too much and benefiting from encouraging claims and maximising claim settlements.

Insurers argued that these changes would reduce costs faced by insurance companies. This in turn would lead to lower insurance premiums for consumers. It would also discourage fraudulent or exaggerated claims.

However, critics argue that insurance premiums have not significantly decreased, while insurer profits have continued to rise.

The Reality for Personal Injury Solicitors

The LASPO Act also introduced changes affecting solicitors, which made it necessary for them to recover some costs from successful claimants to remain viable. Fixed fees were introduced for many types of claims, and less fees were recoverable from losing insurers.

Ultimately, there would be more financial risk in taking on cases.

Is It Still Worth Making a Claim?

Despite these changes, pursuing a valid personal injury claim is still worthwhile:

You can still receive significant compensation for your injuries and losses
No Win No Fee agreements protect you from financial risk if you lose
Expert legal representation increases your chances of a fair settlement

How to Maximise Your Compensation

We fully believe it is still worth making a claim – the new system just enforces the point that it is vital to maximise any claim settlement. To ensure you receive the best possible outcome:

Choose a reputable, specialist personal injury solicitor
Provide all requested information promptly and accurately
Keep detailed records of all expenses related to your injury
Follow medical advice and attend all appointments
Be cautious about early settlement offers from insurers

While the 25% deduction from compensation settlements is not ideal for claimants, it’s important to remember that receiving 75% of a fair settlement is better than no compensation at all. The current system, despite its flaws, still provides access to justice for those injured through no fault of their own. Remember, while the 25% deduction can seem significant, having expert legal representation significantly increases your chances of receiving fair compensation for your injuries and losses.

Frequently Asked Questions

196 questions have been answered on this subject - ask us your question

Comments & Questions

Read on for questions and advice about claiming...

Hi do you have to pay the 25% on your loss of earnings, damage to tools and paying for medication, or just personal injury part?

Most Solicitors will wish to ensure that the claimant is not faced with unreasonable charges and whilst the 25% deduction will come from the total claim – including loss of income/special damages, it is common that the monies recovered for lost or damaged equipment and medical costs are left undeducted.

Dear Ian,

Thank you for providing this wonderful resource and your expertise. It has been a very interesting read.

I pursued a ‘No Win, No Fee’ claim after a car accident. I took out ATE insurance with the Solicitor and was advised that after the unsuccessful claim was closed that there would be no fees to pay due to having this ATE insurance.

I have now been advised approximately 9 months later that the After the Event insurer has refused to pay out on the insurance policy and thus I am liable for a ‘Medical Report Fee’ and an ‘Expert Addendum Fee,’ within 14 days.

Is this enforceable and what recourse do I have from here? At no point was I informed that fees may be due after an unsuccessful claim.

Chris

Have you referred this back to your Solicitors? You should not have to pay any costs for the ATE if your claim failed – so long as you were not found to have acted dishonestly or fraudulently.

Hi. I have an ongoing claim with express solicitors in manchester and they are charging me 33 per cent. Also their hourly rate is 360 pounds. Is that legal?

If the percentage amount to be deducted on success was explained clearly at the outset and you have signed to consent to such a fee, then the Solicitors are acting legally. Morally however, their conduct is questionable! Our Solicitors cap deductions on success at a maximum of 25% of any awarded damages.

The hourly rate issue is not something that would be of concern.

Hi, I have a claim which is nearing completion after getting knocked off my push by a car which had cut a corner on a junction. My question is do my solicitors take their cut out of my special damages ( bike,helmet, loss of earnings etc) aswell as my injury compensation.

The deduction that a Solicitor will take from your settlement will include the full settlement. However, if there is an element of settlement for future loss of income or future medical costs, that element should be left intact.

I could not work out how to reply to your response to my query earlier, so using this method!
Just wanted to say THANK YOU for responding with a clear answer. I have relayed your feedback to my aunt and suggested she considers using your services. Thank you again!
Chris

No problem – we’re more than happy to help and answer any queries or concerns that your Aunt may have about the claims process – whether she chooses to instruct our Solicitors to act for her or not.

I was in an accident and have been offered an £1800 settlement. My solicitor is trying to take 1400 and give me £400! Is this even legal? I’ve been reading that they can only take 25%? Thanks in advance for your advice.

You will need to refer to the initial conditional fee agreement that you signed when instructing the firm of Solicitors to act. Whilst our Solicitors will deduct no more than 25% of any total settlement, some others will have terms that enable higher deductions.

Your Solicitor should be able to give you a copy of your initial terms of engagement and a breakdown of the costs and why they are deducting the sum that they seem to wish to deduct.

Could you please advise in this case. My wife claimed for personal injuries as a result of the car accident, the defendant admitted liability. We then we got a letter from our solicitor that stated that the shortfall in costs is greater than 25% of the settlement for the injuries and that she is therefore not entitled to a refund.

You need to check the terms of the No Win No Fee agreement that was signed at the start of the claim to confirm the maximum deduction the Solicitor could take from settlement. So long as this stipulates the 25% success deduction, you must then refer the Solicitor to those terms.

My wife is in the process of obtaining a final settlement for personal injury claim for £30,000. I have been told we will pay up to 25% of the total.

What is the procedure for her to question the percentage (if they charge that amount). I gave the solicitor witness statements, photographic evidence (before and after my wife’s fall) and a full diary documenting the care needed over a period of 4 months. The defendant admitted liability, so I do believe that I made the claim a lot easier to resolve work wise for the Solicitor.

Depending on the terms of the Conditional Fee Agreement that your Wife signed when instructing her Solicitors, the Solicitor will be bound by what they can or cannot deduct.

Whether or not the Solicitor is willing, or indeed able to reduce the % deduction figure at this stage is unclear, but you can have that conversation with them.

You can ask the Solicitor for a written breakdown of their total costs and disbursements (the disbursements should be recoverable from the defendant in most cases), so that you are aware as to the maximum that they may deduct from settlement (the Solicitor cannot deduct more than their total cost).

Hi could I please ask a question if you win your case for personal Injury or they settle out of court do you receive 70% of your compensation and the solicitor gets 30% . As per the CFA ? The success fee is this included in the final compensation payout (30%) or is the success fee paid out separately? I have been made an offer of say £27500 the solicitor have taken 30% leaving me with £19250 final settlement but then they have claimed well over £25000 for their costs etc and that leaves the solicitor with a very large chunk of the payout Infact more than me . My CFA stated I would receive at least 70% damages so that means they’re took 30% but my success fee says 25% is this separate or does it mean on the whole payout ? So sorry about all the questions I’m so confused . If you can offer any explanation I would be most grateful.

Thankyou for your assistance with my enquiry

Karen

Depending on the terms of the CFA you signed with the Solicitors you have instructed, the total deductions for success should not exceed 25% or 30%. Our Solicitors offer CFA’s that guarantee that our claimants will face a deduction of no more than 25% of their compensation if successful in their claim. Although in rare cases, a client may also have to repay an ‘After the Event’ insurance premium if they succeed, but our Solicitors do not recommend such cover is taken on a routine basis.

Given your comment, it would appear you may have instructed a Solicitor on the basis that they may deduct up to 30% of any total settlement. It is worth noting that this is not illegal, so long as you have been advised of this with clarity at the outset and before you had signed their instructions. It is also worth noting that your Solicitor cannot deduct more than their total costs as the deduction is capped – in this case, either 30% of your total settlement or the Solicitors total legal cost. Whichever is the lower of the two.

Hello, some solicitors claiming 35% as per Conditional Fee Agreement, is it legal? many thanks

Yes, it is legal – so long as it is explained in full BEFORE any agreement is signed. Whilst it is legal, there really is no need for such a deduction to be made. With our Solicitors, the maximum success fee deduction is 25% of total settlement and in the vast majority of cases, there will be no recommendation to take ATE insurance either, so you won’t have to repay the premium price for such cover on settlement if you succeed with us either.

When seeking a specialist No Win No Fee Solicitor, it is wise to shop around and make sure you don’t agree to any deduction higher than you need to.

Hi Ian,

Thanks for the the info. I was wondering if you could help me with a question.
I have to pay to my lawyers nearly a 50% of my total compensation in non recoverable cost. This nearly 50% includes the succession fee. I thought they couldn’t take more than a 25% of my total compensation but apparently that ‘limit’ was just for the succession fee.
I’d like to know if what they are doing is right because frankly I find the non recoverable cost very high and unfair.

Thanks in advance for your help.

Kind Regards,

Cristina

Much will depend on the agreement you signed to formally instruct your Solicitor to act at the outset. Have you checked the CFA that you signed at the outset?

50% is unreasonable and you should formally complain to the Solicitors about such a deduction and the lack of clarity in their paperwork at the outset.

Hello
The 25% for the no win no fee solicitor companies are these including vat or does the injured person has to pay vat to the solicitor on top there so would loose another big chunk?

Thanks

The VAT should be included within the deduction.

Hi a drunk driver crashed I to the car behind me then he crashed into me
I had my two grandchildren in the car with me the drunk driver ran off and claimed his car was stolen but the police now say he has admitted driving while drunk so I claimed through a no win no fee company for injury for myself and my grandkids so we have now been offered a settlement for my two grandchildren

My question is I know we have to pay 25% but do we have to also pay £280 ate for every person in my car ( each time time for the three of us ) that’s paying it three times?

There would appear to be no need for you to all have ATE insurance. If you all have it, you’ll all have to pay the premium. Given the accident scenario, I would be minded to go without such cover as it is unlikely to be of benefit.

Hi team,

If a person admits liability to the police about a dog attack on me, can I pursue the claim myself for personal injury and just get hourly legal advice where required? 25% fixed fee on a straight forward case seems crazy. Is contacting their insurance directly a bad idea?

Thanks

The benefits of having any claim for injury compensation handled by specialist personal injury Solicitor are clear. Although the 25% deduction at the end of settlement is a possibility, you must remember that the deduction should be UP TO 25% and not necessarily 25%. The deduction is capped and the deduction must be a maximum of 25% of any awarded damages or no more than the total of your own Solicitors legal costs – whichever is the lower. A specialist Solicitor will ensure that your legal rights are upheld and that your injuries are properly accounted for along with any losses or costs incurred as a result of the injuries sustained. Therefore you’ll be sure that any settlement will be maximised in your favour. There is a misunderstanding in the wider public regarding the amount of fees specialist personal injury compensation Solicitors obtain when acting on claims. Firstly, on a No Win No Fee basis, Solicitors won’t receive any costs if they don’t succeed with a claim and they absolve the claimant from facing liability for defence costs in such a situation. Secondly, due to Government changes to the legal system regarding personal injury compensation, specifically Solicitor fees and how much liable Insurers must pay, Solicitors are now forced to act on very limited fixed fees with the defendant insurers and have been forced to have to take a deduction from claimant settlement as the Insurers argued (successfully) that a successful claimant must contribute to their own legal costs.

You can of course represent yourself and enter in to a claim directly with a 3rd party insurer – if you know their details. However, you need to remember that the defendant insurers will have legal professionals in place acting against your claim.

If a person admits liability in police interview for a big bite attack, should the solicitor reduce the 25% fee as there is less risk in the case?

If you are referring to a Criminal Injuries Compensation Authority (CICA) claim, the Solicitor cannot recover ANY fees whatsoever from the CICA. Therefore, their only source of income would be by succeeding and obtaining 25% of the claim value. As such, it is unlikely to be viable for the Solicitor to reduce the fee on such a claim.

Can’t they claim from insurance the costs if they win?

Claimants can no longer recover all of their legal fees if they win their claim. As of 1st April 2013, when the LASPO Act 2012 came in to force, claimants must contribute to their own legal costs. This is capped at a maximum of 25% of their awarded settlement or the total of their own Solicitors costs (whichever is the lower). Furthermore, claimants can not recover the cost of ATE insurance either.

Do personal injury solicitors minus the 25% fee first and then the ATE premium? OR
Do they minus the ATE premium first the the 25% fee?

Because if they took away the ATE premium first, it would be beneficial to the claimant.

The ATE premium will be deducted from the total settlement value and the Solicitor can then deduct up to 25% of the remaining settlement.

Remember that the deduction % is capped and cannot exceed the total of the claimants own Solicitors costs.

Hi, im currently pursuing a claim for a car accident For loss of earnings and injury, Does the 25% fee come off the total claim or just the injury claim? Will i have to pay 25% on loss of earnings?
Many thanks paul

The 25% deduction will come from the total settlement. That would include previous loss of income or other costs. However, should any element of the settlement include future loss of income or future medical/rehabilitation bills, there should be no deduction from that element.

Hi,
I have been contacted by a company today called visible legal about claiming back fees that a solicitor acting on my behalf last year may have taken off my settlement figure ( car accident). This caller claimed the solicitors are paid by the third party and there is 25% of final settlement set aside for me. They were asking me to sign some documents re this. Is this a scam?
Thanks in advance,
Nicola

It would appear to be an illegitimate call that you have received. The Government changed the laws and systems relating to personal injury compensation in 2013. Prior to that, a claimant would pay no costs if their claim failed, but could recover ALL of their legal fees on top of any compensation if they won – therefore retaining 100% of any compensation. The changes implemented prevented a successful claimant from recovering all of their costs from the defendant and also reduced the amount that Solicitors could be paid for their work. This led to the requirement for claimants to contribute up to 25% of any compensation awarded to them towards the costs of the claim if they won. So long as your Solicitor informed you of this at the outset and it was stated clearly in the Conditional Fee Agreement that you signed to instruct them, they have acted correctly and there will be no fees to recover.

The only caveat to this would be the way that the 25% deduction is capped. The deduction must capped at the lower of one of two criteria: Either 25% of the total awarded settement or the total of the claimants own Solicitor cost as a Solicitor CANNOT deduct more than 25% of the awarded settlement. As an example, if a claim settled for £20,000 and the claimants Solicitors costs were £6,000, the Solicitor could only deduct 25% of the total (£5,000). If the Solicitors costs had only been £3,000, the Solicitor would deduct less than 25% as they could only deduct £3,000.

Does the Solicitors have rights to take 25% of my losses and injury or just the injury?

Your Solicitor can deduct up to 25% from the TOTAL settlement. In most cases, it is only future loss of income that cannot face deduction.

Hi Ian
I was involved in a no fault accident with the other side accepting full responsibility. 2 weeks after the accident I applied for personal injury damages and explained that as the other side had already accepted responsibility a “no win no fee” arrangement did not seem correct. The large legal firm would not move except to say the 25% is a maximum. The case is over and they have charged the full 25% deduction and the ATE insurance. Do I have claims for a reduction? I have tried to discuss but they will not move.

If the Solicitor that you instructed failed to advise you that you would face an ATE deduction (if successful) as well as the 25% deduction, they should – at the very least – be forced to waive the ATE premium fee as you have not been advised of it – or agreed to it.

If you have not already done so, you could raise a formal complaint to your Solicitor (check their website for their complaints procedure policy). If the complaint fails to resolve the matter, you could then escalate it to the regulator and legal ombudsman service.