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Client account interest money-maker provokes concerns

12 January 2026
Categories: Legal News , Profession , Legal services , Costs
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Ministers’ proposals to raise funds by seizing interest on lawyers’ client account schemes could ‘cause firms to close’, solicitors have warned

The Ministry of Justice (MoJ) consultation, 'Interest on lawyers’ client accounts scheme', published this week, proposes that law firms keep a portion of the interest while another portion is remitted to the government. The government would take 75% of interest on pooled accounts and 50% of interest on individual accounts, which tend to be used for longer-term work such as probate and cost more to administer.

Justice secretary David Lammy said: ‘We believe that unearned income could be better invested in strengthening our justice system.

‘This is a tried and tested idea, with similar schemes operating successfully for decades in countries like the United States, Canada, Australia, and France. These models have delivered measurable impact by funding access to justice and legal aid services.’

However, Law Society president Mark Evans said: ‘Firms will close, fees will rise and clients will be impacted if the MoJ goes ahead with the proposal.

‘The cost of doing business in the legal sector is already high, with recent rises to national insurance contributions meaning businesses are paying more. The proposal comes at a time when small firms will have to manage new regulatory burdens on anti-money laundering supervision and tax adviser registration. High street law firms will face a perfect storm of new bureaucracy.’

Currently, different rules apply across the legal profession. Solicitors must return a ‘fair sum’ of interest to the client, CILEX lawyers must return ‘the proper proportion’ of interest, licensed conveyancers and probate practitioners must return interest unless the client has given written consent to another arrangement, while barristers are generally prohibited from holding or managing client money.

Victoria Morrison-Hughes, vice-chair of the Association of Costs Lawyers, said: ‘Costs lawyers may sometimes have to hold client money simply to ensure that funds are available for payment of both disbursements and their own fees.

‘This is not a money-making exercise—simply a way to ensure that work is done smoothly and efficiently. The MoJ must ensure the new scheme does not disadvantage the firms that do this.’

The consultation closes on 9 February.

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Ministers’ proposals to raise funds by seizing interest on lawyers’ client account schemes could ‘cause firms to close’, solicitors have warned
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