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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...

Firstly what a great forum, very informative.

I have a quick question in regards to the success fee, using the expert’s example of the 25% cap whereby an award of £20,000 has been awarded on a £3,000 fee and a £20,000 award on a £15,000 fee is the figure of £3,000 and £5,000 inclusive of vat or can vat be added bringing the totally amount to £3,600 and £6,000?

Solicitor deductions must be a MAXIMUM of 25% and not more. Indeed, there is a cap as you mention. It is not allowed for VAT to be charged on top of the deduction and the explanatory note to The Conditional Fee Agreements Order 2013 states any success fee must be inclusive of VAT.

Thanks Ian, sorry I forgot to ask…. if a solicitor was to charge 20% rather than the 25% can they then charge vat on the success fee as this will still be a lesser total then the 25% cap?

I can’t speak for all firms, but those with whom we work, would never add VAT to any settlement deduction.

Hi i have won a personal claim they offered me £5000 less 25% do i have to pay the 25% as i did not use a lawyer thankyou.

If you have not employed or instructed a specialist Solicitor to act for you on a No Win No Fee basis, it is hard to understand why the defendant insurers are attempting to deduct 25% from your award as you are not claiming any costs.

Is the deduction being taken for costs or because they are holding you 25% liable for your injuries?

My husbands RTA claim was recently settled and he was awarded £2200. From this he had to pay for ATE insurance, the solicitors fee but also the fee for physio which was £500. Is that correct? I thought the defendants paid for any medical expenses?

He was also told the final amount he would receive in the bank would be £1800 and this was stated in a letter. However, they have now said the amount in the letter was wrong and it was an admin mistake. This is totally misleading, is there anything we can do?

With regards to the amount your Husband was promised to receive being written incorrectly, there may be nothing you can do about that but you could argue that you had accepted that amount and considered it ok and that if you had been advised of the actual amount being lower, you may have refused the offer and therefore pursued a claim for a higher settlement.

The fee for the rehabilitation therapy ought to be something that can largely be recovered from the defendant but it maybe that they have disputed the requirements of such therapy and refused to pay for the same. However, if it was your Husband’s Solicitors who arranged the therapy and advised that it would be paid for by someone else, you should hold them accountable for that.

Whatever happens, it sounds as if you have a valid grievance against the Solicitors in question and it would be wise to find their complaints procedure on their website and go through that process with them. If they are unable to satisfy your complaint you could then refer the matter to the Legal Ombudsman service.

I had free legal cover as part of my car insurance when someone crashed into me. I ended up pursuing a claim with them regarding personal injury. I then received a letter from a solicitors saying they had been asked to act on behalf of the insurance company. Everything goes ahead and takes 2 years to settle. There has now been an offer and the solicitors have stated they will be taking 25% of the settlement fee. I am confused as the car insurance had free legal cover and the solicitors were acting on their behalf. Any advice?

The free legal cover would not necessarily mean that you don’t have to contribute up to 25% of your award should you succeed. You need to refer to the paperwork that you signed with your Solicitor and check with your insurers to find out whether or not this deduction is recoverable.

I have legal expense cover on my motor insurance. Would I be entitled to 100% of my compensation if I win ?

It really depends on the amount of cover you have and what policy you have. If you would like our Solicitors to check out your existing LEI cover for you, we would be happy to assist.

Me and my girlfriend were involved in an accident, a car travelling at 50mph ploughed into the back of my slow moving ford transit. I have legal expenses cover, and I’m currently in the process of claiming personal injury damages, loss of earnings, damage to personal property by way of no win no fee.
My girlfriend has settled at £3000 less 25%.
Can I claim back my 25% from my insurer through my LEI?
If yes, is my girlfriends 25% recoverable also?

Without knowing the full cover that you have on your legal expenses insurance, it is not possible for us to say either way. We would recommend that you contact your LEI provider and discuss your before the event insurance with them and find out if you will be eligible to recover your 25% deduction.

I’ve been offered a £25000 ‘global offer’ less 25%. Is that right or is 25% the maximum they can take, depending on whether the costs the solicitor incurred were lower than the £6250?

After successful injury claim, 25% success fee was deduced. At the moment of accident i had Motor legal protection plan. Can i claim to be paid back 25% solicitors fee (expenses) from my Motor legal protection insurance?.My claim was administrated by different solicitors, i haven’t used my legal protection insurers services. Actually at that moment i didn’t know what is Motor legal protection, it was jus automatically added to my policy.
And now i get call from other solicitor, they want to make claim to get back my 25% success fee, but then i need to pay them 35% success fee and other disturbances from the money they manage to get back. I am totally lost, what i need to to, and i cant find any information, is that success fee covered by legal protection. Do i need to use solicitors, or just make claim myself?

You don’t have to use a Solicitor, but is often the best way to ensure that your claim is administrated properly and the outcome maximised in your favour.

In terms of your motor legal protection insurance, whether or not you can claim your 25% fee back on that will depend on the policy and what coverage you have. If a Solicitor is saying that they would like to pursue a claim on that policy, it would suggest to me that a claim would be likely to succeed and that you are covered for such matters.

Are they saying that they would deduct 35% of whatever they recover (for the claim on your 25% deduction)? If so, you should ‘shop around’ for a better price or see if you can negotiate a better rate with them.

When a claim is settled does the solicitor claim 25% of the total award including treatment fees or is it 25% of the injury award ?

It is 25% of the total claim value – but only including PAST losses – any element of the claim that relates to future loss of income or future medical costs should not face ANY deductions. In most cases, we do not deduct anything from medical expenses as we work hard to make sure that any deductions from a settled claim for personal injury compensation are kept to an absolute minimum.