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Why claimants pay 25% of any compensation settlement towards their legal costs

By Ian Morris | Updated January 16th, 2024

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

Prior to the 31st March 2013, claimants pursuing claims for personal injury compensation on a no win no fee basis retained 100% of any settlement awarded to them with no deductions, and paid nothing if they lost their claim.

At that time, the system obliged 3rd party insurers to fully cover their legal costs and insurance costs as well as pay them compensation for their injuries and losses. From 1st April 2013, the law changed and successful claimants were obliged to help towards the cost of their claim by contributing up to 25% of their total compensation settlement and as Solicitors could no longer recover the cost of the ATE insurance premium in a claim, the claimant must also repay the cost of any such policy should they win.

The current no win no fee claims system still guarantees that claimants pay no costs whatsoever should their claim for compensation fail (including for any ATE premium cover put in place).

100% no win no fee removed by The Laspo Act

Sadly (in our view and that of the claimant personal injury sector) the Government bowed to pressure from the Insurance sector and introduced the LASPO Act 2012 (often referred to as the Jackson Reforms) effective from 1st April 2013. This changed the way No Win No Fee claims worked and who paid what when claims were won.

No Win No Fee legal services remained available to claimants, meaning that they could still pursue a claim without having the worry that they would be forced to pay expensive legal fees if they lost. However, the outcome if a claimant succeeded and won their claim for personal injury compensation was very different. The main result of these changes from a claimant perspective was that when their claim for compensation succeeded, they could no longer oblige a 3rd party to cover their legal costs in full.

To compound the problem, personal injury compensation solicitors were forced to work on a fixed fees basis and submit claims via the Portal system. This saw the fees they received from losing insurers for their legal work undertaken in succeeding with a claim reduced by more than half their previous sum, whilst their work and cost burden remained the same. As a result, the only way to cover the loss created by the new law was to oblige claimants to pay towards the legal costs when they won.

Insurers claimed that the cost burden they faced when losing a claim was too great and that solicitors were greedy, charging excessive costs and benefiting from encouraging claims and maximising claim settlements. As a result No Win No Fee solicitors were also banned from charging losing 3rd parties a success fee and the Government wholeheartedly agreed with the Insurance sector view that successful claimants should contribute to their legal fees.

25% now deducted from compensation

The Government decided that when a claimant succeeded with their claim and was awarded a compensation settlement, they would have to contribute a maximum of 25% of any settlement awarded to them which would be deducted by their Solicitor and used towards their costs incurred for running the claim. Further, successful claimants could no longer claim the cost of the insurance premium (ATE cover) that they had taken out from the defendant insurer and would now be obliged to pay that cost from their settlement in addition to the 25% deduction from their settlement award. It should be noted however, that the specialist partner Solicitor firms who pursue the claims Direct2Compensation claimants, work hard to minimise the deductions from claims.

Why did they do it?

The Government took the view that by changing the law relating to No Win No Fee claims for compensation and obliging a deduction from any successful claim, that they would achieve one of the insurance industries key goals – to reduce costs faced by the insurance companies, who form the vast majority of defendants in personal injury claims. For years, the insurance sector via their public mouthpiece, the ABI (Association of British Insurers) whose members had to pay the injury compensation settlements, special damages claims and legal costs when they lost a claim, had decried the ‘unfair’ burden placed upon them by what they labelled extortionate costs caused by the compensation culture sweeping the UK. Of course, the reality was that there never really was a compensation culture, it was just people exercising a legal right to pursue a claim for compensation when they were injured because of the negligence or actions of someone else.

It is interesting to note also, that during this same period when insurance companies decried their cost burden and tried to place all claimants in the ‘trying it on’ box, that their profit margins continued to rise as did the premiums that they charged to motorists, businesses and organisations. In a bid to further increase their profits, they convinced Government to agree that successful personal injury compensation claimants should pay towards the cost of the claims process. As a result, the Government amended the law so that successful No Win No Fee personal injury compensation claimants were obliged to contribute up to 25% of any compensation settlement towards the costs of the claims process as well as paying for any ATE insurance cover from their settlement. Government framed this change as being a move would benefit the wider consumer public as insurance premiums would decline, saving us all money. The Insurers promised that they would pass on the benefit of reduced costs to them by reducing insurance premiums for Motor, Public Liability, Employer Liability and many other insurance policies.

To summarise, the 25% deduction from compensation element of the LASPO Act 2012 and personal injury compensation claims after 1st April 2013, was brought in to reduce the costs faced by a losing insurer. It’s interesting to see that despite their promises and the lower cost burden that they now face, insurance premiums have not reduced in price. Indeed, premiums have risen way above inflation and profits have followed suit.

It’s still worth claiming

Regulated, compliant personal injury claims management companies such as Direct2Compensation and the expert personal injury compensation solicitors with whom we partner fought hard against the introduction of the new regime. Those of us who work in this sector could see that the changes were inherently unfair and in the favour of the huge insurance firms. Alas the Government pressed on. So whilst it isn’t fair, it is the system in which we are obliged to work. Losing 25% of a claim settlement and having to cover the cost of insuring the claim against failure (ATE), when the whole point of making a claim is because you’ve been disadvantaged by someone else’s negligence is far from ideal, but getting 75% of something is better than 100% of nothing. We fully believe that it is still worth making a claim and the new system just further enforces the point that it is vital to maximise any claim settlement.

ATE premium costs cannot be recovered so must be paid by successful claimants, but only if a claim is won. It is important to remember that ATE cover only needs to purchased if a claimant does not already have suitable cover. Suitable existing cover would be ‘legal expenses insurance’ – also known as BTE (before the event) insurance. It is important to discuss this with your Solicitor before asking them to provide ATE cover for you. Many people have BTE cover already and it can be attached to motor insurance policies, home & contents insurance cover, financial products such as credit cards or through union membership. If you would like to find out more about ATE & BTE insurance cover, please contact us or ask your Direct2Compensation specialist solicitor.

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.