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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, I am due to settle an insurance claim (after third party ran me over). They have made a part 36 offer of a global payment. Can I insist on a full breakdown instead? Can I insist third party break down this global offer to all component parts? That way I can see how much they are paying for each aspect of claim. Eg injury, trauma etc…

You can certainly ask them to do so.

Does the 25 percent come off all the money offered including that for loss of earnings?

The total deduction cannot exceed more than 25% of the total settlement (excluding any ATE policy cover). In most cases, any element of the claim that relates to future loss of income or future medical costs will not face deduction.

I have recently had an injury claim settled. The company handling the claim had deducted their fee of 25% of the compensation, but they have also taken a charge of 25% from my out of pocket expenses, i.e. treatments, costs of travel to medical appointments, is this correct?

They are justified in taking a deduction of a total of 25% (never more) from the ENTIRE damages awarded to you.

Hi i am currently making a personal claim for injury after a serious accident at work. They have given us an interim payment, they took 25% plus then charged me vat on top this, doesn’t seem right, can you help? Thanks.

You should ask for a copy of the Conditional Fee Agreement (CFA) paperwork that you signed to check what deduction you had signed up to make from any award received.

As long as the amounts deducted are accurate with regards to your signed documents, then all is fine. Of course, if the Solicitor has deducted too much make them aware and they should resolve the situation.

Hi. Apologies if this has been asked before, however my partner had a RTA in April 2018. She is using Russell Worth to make a personal injury claim in which they will take 25% of the final sum awarded. Since April 2018 she has incurred expenses including mileage claims, loss of earnings and prescription charges. Can you tell me whether they are allowed to deduct 25% from these expense claims please?

The total deduction can come from the total settlement and may also include loss of income and incurred costs. In most cases, Solicitors will do all that they can to minimise a deduction from loss of income or future medical expenses, but it really does depend on the level of damages awarded and the total costs incurred by the Solicitor in pursuit of the claim.

Is it correct that you take 25% and also take 10% from my insurance that I have making me pay twice as I pay for the insurance?

We don’t recognise the 10% additional deduction you mention. Our Solicitors work in accordance with the current legal requirements of No Win No Fee (conditional fee agreement) legal matters. This confirms that you would pay no costs whatsoever to any party should your claim fail. However, if you were to succeed with your claim, the deductions that can be taken are a maximum of 25% of any award made to you along with the need to recover the cost of any provided ATE cover (as you are no longer able to recover the ATE premium cost from the defendant). Whilst ATE premium’s can vary, a typical ATE cover fee will be somewhere between £150 – £300.

Your posts are quite informative, but I wonder whether some of what I have read may need amending?

You say that the deductions from clients is capped at a maximum of 25% from damages and that it is the lower of either the 25% deduction or 100% of base fees. But as I understand it, the success fee can be up to 100% of base fees meaning if say a solicitors fees were £10,000, they would be entitled to claim a further £10,000 being 100%. obviously if my claim settled for £10,000 then they can only tale £2500 from my damages as this represents 25% but, as I understand they could seek the shortfall because that is not capped.

The key issue here is that the Solicitor CANNOT deduct from your damages anything more than the 25% of your settlement (they will also have to deduct any premium for ATE insurance). A Solicitor may attempt to recover further fees from defendants, but they are unable to take further from a claimants award.

Good morning, I settled a personal injury professional negligence claim last year. I accepted a part 36 offer of £150000, I only received £40000 from the compensation and now the solicitors are wanting £50000 back for their costs plus interest, so the claim could leave me £10000 worse off than when I started, are their fees capped at 25% of the compensation?
Be grateful for any advice.

If you pursued your claim on a Conditional Fee Agreement (No Win No Fee) basis, your Solicitors fees and restrictions upon them should be clearly set out in the agreement you signed. Your Solicitors fees should be capped.

Your Solicitor should be entitled to deduct 25 % from all of your past losses – so that would include any out of pocket expenses incurred, general damages for the actual injury/pain/suffering, loss of earnings, care etc. When calculating the deduction our Solicitors normally exclude treatment costs and leave those 100% intact but this is optional and will depend on the nature of the claim and the work undertaken by the Solicitor.

The 25% deduction doesn’t come off any future losses – for example future loss of earnings, disability on the labour market, future care costs or future treatment costs etc – it only applies to past losses.

Incidentally, and most confusingly, the success fee is not always a full 25%. It has a double cap. It is capped at 100% of the value of the actual costs we incur, or 25% of the compensation – whichever is the lower of the two figures. By way of example, if the claim settled for damages of £20,000 and our Solicitor had done work to the value of £3000, then the most our Solicitor could deduct from the compensation would be £3000. (25% would be £5000 and so the £3k would be the lower of the two figures). Conversely if the claim settled for damages of £20,000 and our Solicitor had done work to the value of £15,000 then the most they could deduct would be the 25% at £5000.

If you have legal cover with your motor insurance, do you still have to give the 25%?

It really depends on the kind of cover you have and to what extent the cover will reimburse any incurred costs.

Many daughter has just been awarded £216000 from the CICA
Her solicitor has charged 25% for the work plus another £8000 for medical report which £750 was for a rewrite of a report when they got a two names spelt wrong.
Two questions should my daughter have to pay for the rewrite?
Secondly the £8000 for reports seems excessive as it included taxi fairs for the solicitor etc

My daughter will need support for the rest of her life and have only £147000 out of a claim of £216000 seems excessive.

You mention a very substantial settlement, so it would be reasonable to expect that some of the costs of the work involved would also be substantial. However, £8,000 for a medical does seem excessive. Whilst it could be legitimate, this is something you should query with the Solicitor and perhaps ask them for a written explanation of the costings and deductions. If you are not satisfied with their response, you could then escalate this matter and contact the Legal Ombudsman Service so that they can independently review this for you.

My solicitor has sent the details of my claim off to be valued by a Barrister before presenting it to the other side. Who will cover the cost of this? Will it come out of his 25% fee of will it be deducted from my final award? Also, any private medial consultants I have been sent to by him, where does the cost of this come from?

Thanks Ian. That clears things up. Best wishes

You will not pay a fee for the Barristers opinion and in most cases, no deductions for any medical treatment. This should all be included in the costs that you will recover from the defendant and will not be taken from your compensation. The only fees you should pay at the end if successful will be a deduction of 25% from your total award and the cost of any ATE insurance premium if you have required that (usually around £200).

The Barristers opinion is vitally important to you and your Solicitor as the Barrister is an expert and will use case law and guidelines to form a valuation range for your claim based on expert medical reports and the impact your accident has had on your life. Once your Solicitor has been given a valuation range, they will contact you to provide the details.

I have received a settlement offer from 3rd party insurance through my solicitor it says on letter that offer subject to deductions, 1 being success fee which I know and that’s fine but other is physio costs coming off the settlement offer is this right and can they do that take physio costs off my final settlement? I thought they were liable for any medical expense, confused.

In some cases, the defendant will pay rehabilitation costs as well as compensation. However, in your case they may have agreed to cover the costs of your physiotherapy as part of the total settlement value. Therefore, if they have already paid for the rehab costs, they would be entitled to deduct any previously paid costs that are a part of the total settlement from the final payment. You should of course check with your Solicitor as to what was agreed to make sure that you are not losing out.

Hi there, I had an accident on Nov 2013. My case dragged out a very long time and I’m now due payout for my compensation in the next few weeks. My contract with the solicitors appointed never references a 25% fee. Actually, it says the opposite – it says I will receive 100% of my compensation and all fees will be pursued by the 3rd party. I have also been told by the solicitors that i won’t pay any fees, however, I am skeptical. Namely, because on google reviews many many of their other clients say they were blindsided by a 25% fee despite being told they’d pay nothing. I have tried to get a confirmation in writing from them but so far, they have refused to give me any information until the payout if received. Quite poor actually and I don’t really trust that they won’t try to pull the 25% out of my comp. My question is, does the new legislation override my contract with them agreed in Nov 2013, or does what we agreed on stand regardless of new legislation? Thanks!

This is interesting and you should certainly seek advice from the Legal Ombudsman Service (and possibly the Solicitors Regulatory Authority – SRA) if the Solicitors do attempt to deduct 25% from any award made to you.

Our understanding is that if the paperwork you have signed makes no mention of any deduction from an award of compensation, the acting Solicitor is not entitled to make any such deduction from your award. If they do make a deduction of 25%, you should immediately complain to the Solicitor (look for their complaints procedure on their website) outlining that you signed terms that confirm in writing that you will retain 100% of any award made to you. If they cannot satisfy your complaint in accordance with their complaints policy, you should then raise the issue to the legal ombudsman and SRA.

Is there any way that i could claim back the 25% deducted from my injury claim i.e. through a third party?

Some people have insurance that will enable the recovery of the 25% deduction, but that is rare and uncommon. If you have existing Legal Expenses Insurance in place, you could contact the provider to see if you are covered.

I have been awarded £2,250 net compensation in a claim for ankle ligament sprain with tears in the ligament and bruising. This happened after I stood in an unseen hole in a water board grate and my foot fell into it.

I received medical treatment, had a scan and medical via the solicitors I used. I have not accepted any offers or had any correspondence with regards to offer. The solicitors are simply saying that the £2,250 is the award.

I just wondered if that also has the reduction of 25% as this was done on a no win no fee basis and if so how much was the award before this? I also thought I had to be a part of deciding what offers I take and be aware of amounts of offers made? I just wondered if the Solicitors are being honest with me about the award amount and how I go about this or does this seem a reasonable offer with regards to injury and recovery of roughly a year? It has also been 2 years since I made the claim!?

If you underwent a medical organised by your Solicitor, you should have been given a copy of the medical experts report to agree or disagree with before it was disclosed to the defendant insurers. Did this not happen?

When it comes to the value of a claim, your Solicitor should approach you with an offer and advise you as to whether it is fair and should be accepted or if it is unreasonable and should be rejected. With regards to the £2,250 that doesn’t seem unreasonably low but without seeing the medical examiners report, we cannot say for certain whether you should have received more or not.

You need to query with your Solicitors as to how this value has been reached – has there been a Barristers opinion sought in this matter?

My solicitor advised me not to accept an offer from the defendant now they are saying I am going to end up with 20 thousand of costs (this is not a print error) my AET insurance is refusing to pay my costs because the defendants expert says I’m lying about my injuries (I wish I was) even though I have 5 experts that agree about my injuries, my solicitor said I only need to be worried about the amount of compensation I receive, now I’m looking at over 20k worth of costs due to his bad advice. I’m so worried he also said that if I lose in court I could go to jail, so I was scared and accepted an offer out of time. I’m so worried about the costs I just don’t know what to do.

If you are acting honestly and have not committed any fraud, you will have no risk of jail so please do not worry about that. If you have 5 expert opinions who on your injuries and condition, the fact that the defence has produced 1 expert to contradict that should not matter.

My solicitor is claiming 3k for hearing loss charging 25% fee plus £2k ATE I’ll end up with £250 I lost 2 days pay going to appointment & hearing tests plus fuel will end up with nothing how can they charge £2k for a ATE on a 3k claim?

£2k for an ATE premium is ridiculous and needs to be questioned urgently. Are you sure this is not a typing error? You should immediately complain to your Solicitor regarding this and if they are unable to provide a positive outcome you should immediately refer the matter to the Solicitors Regulation Authority (SRA) and Legal Ombudsman service.

Standard ATE premiums range from £110 – £220 with some policies being a little more at around £400, but I have not heard of such a high premium so can only assume that it is a typing error.

I had an RTA where liability was admitted straight away in the portal. Can solicitors still claim a success fee in this case? I thought if liability was admitted them they could recover their costs from the other side in full?

Sadly not. The LASPO Act 2012 and the Jackson Reforms to Personal Injury compensation (effective 1st April 2013) mean that your Solicitor is unable to recover FULL legal costs. Therefore, if you succeed you will contribute a maximum of 25% of any award towards the costs of the claims process.

Hello, just a quick question, I had a accident in my, which was non fault. Just had offer is it right that they are taking out the physio FEES?, I know it’s right that they take ate fee and cfa fee but don’t understand why I’m paying for my physio.

You need to check with your Solicitor on this but commonly, the cost for physiotherapy or rehabilitation treatments can be recovered from the defendant as part of the settlement. This will be the case if a medical expert has included a requirement for such treatments in their report and both sides agree to this.
In your case, you should only be paying for the physiotherapy if it was something you elected to have without having an agreement in place for the defendant to cover the cost of the same.

I won a claim against my former employer. They breached their duty of care which lead me to have long term condition (tennis elbow plus surgery). Solicitors said that agreed to a settlement of £15k – they deducted their success fee of 25% plus insurance. The Solicitors deducted the success fee from original settlement and sent me my settlement with a final amount from their own company (basically of the name of solicitors) so i’ve never seen the settlement paperwork from my former employer or any other document saying that they agreed on £15k. I trusted my Solicitors.

However, after few years I heard people talking that my former employer paid £55k for me and not £15k and I really do feel that my claim was underpaid. Plus I researched about these Solicitors and they do have some bad reviews from their former employees who is saying that they do underpay claimants or claim was underpaid due to them not bothering to do the job properly. Is it possible that the Solicitors faked the agreed amount? Or maybe they did receive £55k but gave me only £15k (actually around £10k after fees) And how can I check this? Thank you.

If you have used a legitimate firm of Solicitors, you probably have no concerns but they ought to be able to clarify everything to you so that you can understand that everything is correct as they have stated.

You have 2 options here now. Firstly, you should view your Solicitors website and locate their complaints policy and then launch a complaint in order to get their explanation as to your concerns. If you are not happy with their handling of your complaint, you should immediately contact the Solicitors Regulatory Authority and complain to them so that they can investigate this for you.