Costs Budgeting and Precedent H: A Practical Guide
Practice Guides — 2026-03-24
How costs budgeting works and how to get your Precedent H right: phases, assumptions, hourly rates and the costs management conference explained.
Updated 7 September 2026.
Costs budgeting is one of the most important procedural requirements in civil litigation. Getting it right can protect your client's costs recovery. Getting it wrong can leave thousands of pounds on the table, or worse, result in an automatic budget being imposed by the court.
This guide explains how costs budgeting works, how to complete Precedent H, and what to expect at a costs management conference. It is written from the perspective of a specialist costs practice that prepares budgets and provides advocacy at CMCs for law firms across England and Wales.
What Is Costs Budgeting?
A costs budget records incurred costs and forecasts future costs by litigation phase. The court manages recoverable budgeted costs; approval is not a promise that every amount will be recovered or that the client’s liability is limited to the budget.
The ordinary regime is in CPR Part 3, Section II and Practice Direction 3D. Identify any applicable pilot or case-specific order before preparing the form.
When Is Costs Budgeting Required?
CPR 3.12 applies the ordinary regime to Part 7 multi-track cases, subject to its exceptions. These include specified claims valued at £10 million or more, qualifying claims brought by or for a child, fixed or scale costs, and a contrary court order. The dates and conditions in the rule matter. The court can also order budgeting in other proceedings.
Review the current costs-budgeting pilots as well as the court order. For example, PD 51ZG2 applies a simplified process to defined claims issued on or after 6 April 2025 and before 6 April 2028 in specified courts. It uses Precedent Z, RZ and TZ and disapplies CPR 3.13 and 3.14. The ordinary timetable below must not be applied automatically to a pilot claim.
Precedent H: The Budget Format
Under PD 3D, the ordinary budget uses Precedent H unless the court orders otherwise. Use only its first page where total incurred and estimated costs do not exceed £25,000 or the claim-form value is less than £50,000. Different forms may apply under a pilot.
Separate incurred costs from future budgeted costs. The court does not approve incurred costs, although it can record comments and take them into account. Work already done belongs in its relevant phase; it is not all put into the pre-action phase.
The form brings together fee-earner time, rates and disbursements. Give brief assumptions that materially affect the figures, rather than repeating the standard phase descriptions. Written assumptions are not normally required where only the first page is lodged.
For the later recovery stage, read the guide to detailed assessment.
Completing Each Phase of Precedent H
Pre-Action Costs
Use the PD 3D phase table. Pre-action protocol work and investigations belong here, but work already incurred in relation to another phase belongs in that phase. Timing alone does not determine the classification.
Issue and Statements of Case
This covers preparation and service of the claim form, particulars of claim, defence, and any reply or counterclaim. Include time spent reviewing and advising on the opponent's statements of case. Assumptions should specify the number of statements of case anticipated and their estimated length.
CMC (Case and Costs Management Conference)
This phase includes directions questionnaires, preparation for and attendance at the CMC, relevant correspondence and finalising the order. Keep the costs of preparing the budget and associated material outside the draft phase figures, in accordance with PD 3D paragraph 8 and CPR 3.15(5).
Disclosure
Base the forecast on the applicable disclosure regime, anticipated document volume, review work and any platform costs. In the Business and Property Courts, consider PD 57AD where applicable. Allocate separate applications using the PD 3D table rather than treating all disclosure-related work as part of the ordinary disclosure phase.
Witness Statements
This covers the preparation, exchange, and service of witness evidence: taking instructions, drafting statements, and reviewing the opponent's statements. Assumptions should identify the number of witnesses, estimated length of statements, and any special requirements such as interpreters.
Expert Reports
Expert evidence is often one of the largest cost items, covering the instruction of experts, review of reports, Part 35 questions, and joint discussions. Assumptions should state the number of experts, their disciplines, and whether a single joint expert or party experts are to be instructed.
PTR (Pre-Trial Review)
Not all cases have a PTR, so this phase may be left at nil. If a PTR is likely, include the costs of preparation and attendance, including counsel's fees.
Trial Preparation and Trial
Trial preparation covers preparation of trial bundles, skeleton arguments, chronologies, and counsel's brief fee. The trial phase itself covers attendance at trial, counsel's refresher fees for each day beyond the first, and post-trial submissions. Assumptions should state the anticipated trial length and the number of advocates and solicitors attending each day.
Settlement/ADR
This covers the costs of settlement negotiations and ADR, including mediation fees, preparation of position statements, and attendance. Firms sometimes omit this phase or estimate it at nil, which is a mistake. The court expects parties to engage with ADR, and the costs of doing so should be budgeted.
Contingencies
Include anticipated work outside the main phase categories only where it is more likely than not to be incurred. Describe the work and assumptions briefly. Disputed work belonging to an ordinary phase stays in that phase and can be marked disputed. A contingency is not an allowance for every application that might conceivably arise.
Common Mistakes When Completing Precedent H
Reconcile the ledger to the incurred figures, prevent duplication between phases and keep future work distinct from work already done. Use realistic assumptions about witnesses, experts, disclosure and trial length. Preserve the spreadsheet formulae and review the totals.
Do not inflate contingencies to compensate for uncertain instructions. Establish the likely work first. Equally, a low figure is not defensible simply because the opponent may agree it.
Review recoverability, funding and the scope of the proceedings before including a cost. Keep the costs of preparing the budget and associated material outside the draft phases.
Filing and Exchange Requirements
Under the ordinary CPR 3.13 regime, unless the court orders otherwise, represented parties file and exchange budgets with their directions questionnaires where the claim-form value is less than £50,000. In other cases, the deadline is no later than 21 days before the first case management conference.
The budget discussion report is due no later than seven days before that conference under CPR 3.13(2). Review any applicable pilot and the court’s directions before calculating either date.
CPR 3.14 ordinarily treats a party who fails to file a required budget as having filed a budget comprising only the applicable court fees, unless the court orders otherwise. Seek advice promptly about any application for relief. Pilot claims may have a different sanctions regime.
The Costs Management Conference
The costs management conference (CMC) is the hearing at which the court considers the parties' budgets and either approves or sets figures for each phase.
What to Expect
The court will have read the budgets and the Precedent R reports. The judge will work through each phase of each party's budget, considering the figures, the assumptions, and any objections from the opponent. The court will either approve the budgeted costs (if satisfied they are reasonable and proportionate) or set different figures. Proportionality is a key consideration: the court will weigh the value of the claim, the complexity of the issues, the importance of the case, and the financial position of the parties.
How to Prepare
Effective preparation for a CMC involves:
1. Review the opponent's budget carefully. Identify any phases where the opponent's estimated costs appear unreasonable and prepare specific objections. Generic challenges ("the costs are too high") carry little weight. Specific challenges ("the estimate of 40 hours for disclosure is excessive given that the documents are limited to a single lever arch file") are far more persuasive.
2. Prepare the Precedent R (budget discussion report) thoroughly. This is the document that tells the court where the parties agree and where they disagree. It should be filed no later than 7 days before the CMC.
3. Be ready to justify every figure. The court may ask questions about specific phases. Be prepared to explain the basis for each estimate and to point to the assumptions that support it.
4. Consider what you are willing to concede. If the opponent challenges a figure and you know it is on the high side, it may be tactically sensible to offer a modest reduction rather than have a larger one imposed by the court.
5. Bring a copy of the budget in a format that allows amendments. If the court adjusts figures, you will need to produce a revised Precedent H reflecting the approved or set figures.
Precedent R: The Budget Discussion Report
Precedent R is the budget discussion report that parties must file before the CMC. It records the areas of agreement and disagreement between the parties on each other's budgets.
The parties should attempt to reach agreement on as many phases as possible before the CMC. In practice, full agreement is rare, but partial agreement narrows the issues the court needs to decide and makes the CMC more efficient.
In practice, one party sends comments on the other's budget and the other responds. The final document should clearly identify phases where figures are agreed, phases where figures are disputed (with brief reasons), and any specific items of concern. The Precedent R must be filed no later than 7 days before the CMC.
Monitoring and Revising the Budget
Track work and spending by phase against the assumptions and approved figures. An overspend is a reason to investigate; it is not itself a significant development warranting revision.
Under CPR 3.15A, significant developments may require revisions upwards or downwards. Serve the prescribed particulars promptly, seek agreement and submit them promptly to the court with the last approved or agreed budget and an explanation of any remaining differences.
The ordinary variation form is Precedent T. A variation may include related costs incurred before the variation order but after the costs management order. Do not treat incurring some costs as an automatic bar, or wait until assessment to address a development.
The Good Reason Test at Assessment
Where a costs management order has been made, CPR 3.18 governs standard basis assessment of approved or agreed budgeted costs. The court considers the last approved or agreed figures by phase and does not depart from them without good reason.
Keep incurred costs separate and account for comments recorded in the order. A budget does not entitle a party to recover costs it has not incurred or remove the need to consider the costs order, applicable assessment rules and actual work.
Whether there is good reason depends on the evidence. Overspending, changing solicitor or identifying an earlier budgeting error should not be presented as an automatic ground for departure.
What to Send for a Costs Budget
Provide the statements of case, claim-form value, court directions and hearing dates, together with the time ledger, fee-earner details and relevant disbursements. Include the proposed litigation timetable and assumptions about disclosure, witnesses, experts, settlement and trial.
For a revision, also provide the approved or agreed budget, costs management order, any earlier variation and the evidence of the significant development. Identify work already incurred in connection with that development.
For preparation, review or hearing support, see Mackenzie Costs’ costs budgeting service. The scope, timetable and fee basis are agreed before substantive work begins.
How Mackenzie Costs Can Help
Mackenzie Costs prepares budgets, budget discussion reports and revisions, and provides costs management advocacy for firms across England and Wales. Send the papers and deadline through the contact page to discuss the required work.
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