Simplified Costs Budgeting 2025: All you need to know
Posted on 2nd April 2025 at 12:46
With the 179th Practice Direction update taking effect on 6 April 2025, the long-anticipated Simplified Costs Budgeting is finally here. In addition we also have the 183rd Practice Direction which expands Simplified Costs Budgeting and came into force on 6 April 2025.
Also known as Costs Budgeting Light, the pilot scheme aims to make the budgeting process more proportionate to the complexity and value of claims – marking a significant shift in litigation practice.
As Costs Lawyers and Specialists will invariably take the lead in navigating the new rules and forms, the pilot will redefine how practitioners approach costs management (in applicable cases) and ensure efficiency without compromising accuracy.
The true test, however, will be in how Simplified Costs Budgeting operates in practice – whether it streamlines litigation as intended or introduces new challenges that practitioners must overcome.
What is Simplified Costs Budgeting?
Simplified Costs Budgeting is a pilot scheme which will apply to Business & Property Courts claims (or Business & Property work) in the Manchester, Leeds or Central London County Courts) with a value of less than £1million. It also applies to any other claims to which budgeting would ordinarily apply and the claim value is less than £1million and are proceeding in the Central London County Court or the Leeds or Bristol District Registries. It isalso set to apply to claims with QOCs in the District Registries at Manchester and Birmingham.
The intention is to simplify the Costs Budgeting process and will see the introduction of a new Precedent Z (Simplified Costs Budget), Precedent ZR (Simplified Budget Discussion Report) and Precedent ZT (Simplified Precedent T) for varying approved/agreed costs budgets.
Of the applicable claims it will only apply to claims issued on or after 1 April 2025 and before 1 April 2028, the three-year time period during which the scheme will run.
What claims do the new Simplified Costs Budgeting 2025 rules apply to?
The Pilot Scheme will see the introduction of three new Practice Directions (PDs), PD51ZG1, PD51ZG2 and PD51ZG3.
The Pilot Schemes will apply to:
- Certain claims in the Business and Property Courts and Business and Property work in the County Courts at Manchester, Leeds & Central London which hare issued between 1 April 2025 and before 1 April 2028 with a value of less than £1million.
- Claims with a value of less than £1million which are issued on or after 1 April 2025 and before 1 April 2028 (and to which budgeting would apply) and which are proceeding in the Central London County Court or at the Leeds or Bristol District Registries.
- Claims in the District Registries at Manchester and Birmingham to which QOCs applies. There is no maximum value on the applicable claims.
Litigants in person remain exempted from budgeting.
What is the procedure?
In summary, where the pilot schemes apply it will be as follows:
1. Simplified Costs Budget to be filed 21 days before the first CMC (unless the courts order otherwise)
2. Simplified Budget Discussion Report to be filed 7 days before the first CMC (14-days before the first CMC for applicable QOCs cases, though only Defendants to file and serve)
3. If a CMO is made then either party can apply to vary their Costs Budget where there has been a significant development.
4. If no CMO is made then parties must file and serve an updated simplified Costs Budget 7-days before the start of the trial, the start of the trial window or before any PTR (whichever is earlier).
5. In addition, where no CMO is made the court can order parties to file updated simplified Costs Budgets at any stage.
6. Any party who does not comply may be sanctioned including the possibility of court fees only.
At the first CMC the court can either make a costs management order by reference to the simplified budget or determine under CPR 3.15(2) that a CMO is not required.
If no CMO is made then parties must file and serve updated simplified Costs Budgets no later than 28 days before (and whichever is the earliest of):
i) The start of the trial
ii) The start of any trial window
iii) 7 days before any pre-trial review
The court may also order a party to file an updated simplified costs budget at any stage of the proceedings.
Further, where no CMO is made CPR PD 44 3.2 to 3.7 will apply. This specifies that where parties have filed a Costs Budget but no CMO has been made then if there is a difference of 20% or more between the costs claimed by a receiving party on assessment the costs in the budget previously filed then there must be a statement of reasons explaining the difference. The court on assessment will have regard to the budget.
In addition, the paying party could argue that they reasonably relied upon a budget filed and also rely on that same budget in order to dispute reasonableness or proportionality of the costs claimed.
Where either the paying party can show it relied upon the budget or there is not a satisfactory explanation for a difference exceeding 20% the court can restrict the recoverable costs claimed and may find that the difference between the costs claimed and the costs shown in the budget as evidence the costs claimed are unreasonable or disproportionate.
Notably, the court can sanction any party who fails to comply with the PD and have complete discretion as to that sanction which includes limiting the recovery of the costs to be incurred to the applicable court fees.
In addition, for Business & Property Courts / Business & Property work in the County Court, a claim with either no statement of value or seeks only non-monetary relief or the parties are unable to agree whether the claim value is £1million more, unless the court orders otherwise, the claim shall be treated as though it’s worth over £1million and the pilot scheme will not apply. This exception appears to only apply to BPC claims & work and is specifically not included in the pilot scheme for certain other claims with a value of less than £1million.
For cases to which QOCs apply and simplified Costs Budgeting is applicable ordinarily, the Claimant will not need to serve a budget discussion report. There may be some circumstances such as where fundamental dishonesty is raised where this may still be necessary. The Court's view is that QOCs means a Claimant will not ordinarily be paying the Defendant's costs. The Court will retain discretion to costs manage Defendant's costs in any event. They will still be required to submit a simplified Costs Budget.
PD51ZG3 makes clear that if either party intends to seek a direction for either a) a split trial or b) that the litigation can only be conducted justly and at proportionate cost if the court manages costs using Precedent H then the Defendant will not be required to file and serve a simplified budget discussion report 14-days before the first CMC.
The court in applicable QOCs cases will have discretion to give full costs management directions which can require either or both the Claimant and the Defendant to file and serve a full Precedent H or updated simplified costs budget with a possible costs management hearing if necessary.
What do the new Simplified Costs Budgeting forms look like?
The Simplified Costs Budget is 2 pages, a front sheet tab and an assumptions tab.
Both the incurred and budgeted costs are broken down into time, counsel and other disbursements for each phase.
Gone are details of how the time or disbursements actually split down which, given that budgeting is not meant to address the granular detail, does make sense. Notably hourly rates are no longer addressed in the budget documents.
The new document alongside claim details includes space for the value of the claim, counterclaim and any additional claim, highlighting the emphasis on the sums in issue when the court undertakes the costs management exercise.
Below the grand total is a total for the approved budget and a separate total for the budgeted costs. It is presumed that amended front sheets will still be required, so parties have an understanding of what has been allowed for each phase.
The assumptions tab is lean, highlighting that the court is unlikely to want to see unwieldy documents, preparing the same is likely to undermine the point of the simplified document.
Practically the lack of detail as to how expert fees may breakdown (particularly in an expert heavy case) could foresee such information having to be delved into during negotiations and any advocacy.
Will the Simplified Costs Budget save time?
It remains up for debate. However, the aggregated figures still have to be prepared somehow and the reality is the simplification comes in presentation and less so in preparation. The detail in the background will ultimately remain the same.
Intriguingly this document adds an extra column but one which is arguably sensible. It largely mirrors the current Precedent R Budget Discussion Report but splits the budgeted costs claimed / offered by time, Counsel and other disbursements. This ensures consistency with the Simplified Budget itself but also makes sense as it avoids the need for parties to break offers down between Counsel and other disbursements in their written submissions.
The columns for the Judges' comments is split out between time and disbursements. This ought to make the Judges' position clearer but is this going into a level of detail beyond what is required? After all budgeting is meant to be a broad exercise and not prescriptive as to how costs are actually spent.
Strictly speaking there is no formal document for the challenged party to reply, but that is much the same with the current form. Some parties prepare written responses anyway. Whether the court will accept such an approach with the simplified procedure remains to be seen.
The Simplified Precedent R is ultimately nothing groundbreaking and will be largely familiar to those who deal with budgeting currently.
This document has two tabs, with the first encompassing a budget front sheet with five sections – incurred, previously budgeted, variation sought and the new total. The fifth section is for completion by the court and is the total budgeted costs allowed or agreed after variation.
The second tab is the variation particulars, essentially the explanation for the change(s) sought, which has two sections.
The first is a table breaking down the additional costs sought, per phase, by time, counsel and other disbursements. Then there is a column for the explanation of the variation and a further column for the opposing parties' comments and offer (though their offers are aggregated rather than broken down like the variation is).
There is an additional separate section to detail any additional expert fees sought under the expert report phase. This table has space for expert type and then for additional report fees, conference fees or joint statement fees. There is then a column for the total variation and a further column for what was budgeted previously. Each expert type will have its own row.
This is intriguing as it goes far beyond the detail in the Simplified Costs Budget itself. The Court obviously feeling it needs this level of detail to consider any variation but not to set the initial budget itself.
Again, this document will be familiar to those who have ever varied a budget before.
How will the new forms be received? And will they make things simpler?
The three simplified budgeting documents seem to be an evolution of the process rather than a revolution and it will be interesting to see what level of time is saved (if at all) and how the court actually approaches matters.
Will parties and the court be happy to deal with budgeting on a broader basis? Or will they end up having to be armed with breakdowns anyway?
Again, the simplification comes from presentation (which should be welcomed) rather than in preparation. The same work and thought is effectively required in order to populate the new precedents.
On negotiations and advocacy, it will be interesting to see how parties and the court approach the same. With hourly rates no longer set out in the budget documents, then the tension remains as to how a proportionate figure is arrived at by the court. Presumably both opposing parties and the court will have rates in mind, even if it is unspoken.
The implementation of the case value on the budget itself suggests the court may have an increased focus on the sums in issue, though this is ultimately just one proportionality factor.
With the Simplified Budget Discussion Report, if the court sets sums for time, disbursements and counsel separately will this conflict with the idea that the phase amount can be spent as the practitioner sees fit.
As the scheme comes into practice (it runs to April 2028), it will be interesting to see the approach adopted by both parties and the court.
A desire to simplify costs management should be welcomed and it's highly likely that such documents will be rolled out more widely in the next few years so getting to grips now will give practitioners a head-start.
What does the new Simplified Costs Budgeting mean for practitioners?
If you are dealing with Business & Property courts work (or BPC work in Manchester, Leeds & Central London county courts), claims with a value of less than £1million within the Central London County Court or Bristol or Leeds District Registries or claims to which QOCs applies in the District Registries at Manchester and Birmingham then it is important to be aware of the changes, specifically around procedure because it remains clear that any non-compliance will be subject to sanctions.
The changes to procedure, particularly where no CMO is made is extremely interesting and will actually require additional work in the guise of updated simplified Costs Budgets.
It’ll also be interesting to see how the pilot schemes develop in the coming years because, if successful, it’s likely the same will be expanded to cover more claims.
What is clear, as has always been the case, is that it is vitally important to prepare a robust costs budget at the outset, otherwise parties run the risk of curtailing costs recovery at the end of a claim.
Need some help or advice?
Should you have any queries or questions around the new Simplified Costs Budgeting 2025 reforms, email info@carterburnett.co.uk or call 01482 534567 for an informnal discussion.
Speed Read Summary – Simplified Costs Budgeting 2025 explained in short
1. Simplified Costs Budgeting is a pilot scheme which will only apply to Business & Property Courts claims (or Business & Property work in the Manchester, Leeds or Central London County Courts) with a value of less than £1million OR any other claims to which budgeting would ordinarily apply and the claim value is less than £1million and are proceeding in the Central London County Court or the Leeds or Bristol District Registries. It will also to apply to claims with QOCs in the District Registries at Manchester and Birmingham.
2. Of the applicable claims it will only apply to claims issued on or after 1 April 2025 and before 1 April 2028.
3. It will see the introduction of a new simplified Costs Budget, simplified Budget Discussion Report and simplified Precedent T.
4. Budgets will be required 21-days before the first CMC (unless the court orders otherwise). Budget discussion reports 7 days before the first CMC (14-days for applicable QOCs claims, Defendant only).
5. Where a Cost Management Order (CMO) is made parties can apply to vary using the simplified Precedent T.
6. Where a CMO is not made, parties will have to file updated Simplified Costs Budgets either 7-days before trial, 7-days before the trial window or 7-days before the PTR, whichever is earliest.
7. Where there is no CMO the court can order updated simplified Costs Budgets at any time.
8. Where there is no CMO then at assessment a receiving party would have to provide a Statement of Reasons where there is a difference of 20% or more between the simplified Costs Budget filed and the Bill of Costs.
9. Where there is non-compliance with the pilot schemes then the court has discretion over the sanction, to include restricting costs to court fees only.
10. For Business & Property Courts / Business & Property work in the County Court, a claim with either no statement of value or seeks only non-monetary relief or the parties are unable to agree whether the claim value is £1million more, unless the court orders otherwise, the claim shall be treated as though it’s worth over £1million and the pilot scheme will not apply. Note, this exception only applies to BPC claims & work.
11. Litigant in persons remain exempt.
12. For applicable QOCs claims all parties will be required to file and serve a simplified costs budget but the Court will not ordinarilly make a costs management order in relation to the Defendant's costs. There is no requirement for a Claimant to serve a simplified costs budget discussion report but Defendants should do say 14-days before the first CMC unless either party seeks a drirection for a split trial or preliminary issue trial; or a direction that the the litigation can only be conducted justly and at proportionate cost if the court manages costs using the Precedent H (full budgeting). The court has the discretion to order parties to undertake full budgeting.
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