Summary
The SRA Accounts Rules govern how firms regulated by the Solicitors Regulation Authority must handle client money — keeping it separate from the firm's own money, banking it promptly, only withdrawing it for a proper purpose, and reconciling it regularly. Most firms holding client money also need an annual Accountant's Report.
What is "client money"?
Client money is money you hold or receive that belongs to a client or a third party in relation to your regulated services. In practice that covers things like:
- →Money held on account of a client’s costs or disbursements
- →Completion and settlement funds in conveyancing or litigation
- →Money held as a stakeholder, or on behalf of a third party
- →Damages or estate funds awaiting distribution
Your own money — fees you have properly billed, and the firm's running costs — is office money. Keeping the two apart, at all times, is the heart of the rules.
Client account vs office account
Client account
- ›Holds money belonging to clients and third parties
- ›A separate bank account, clearly identifiable as a client account
- ›Client money paid in promptly
- ›Withdrawals only for a proper purpose and with the right authority
Office account
- ›Holds the firm’s own money
- ›Billed fees, once properly raised
- ›Salaries, rent, and running costs
- ›Never used to hold client money, even briefly
The core obligations
The annual Accountant's Report
If your firm has held client money during an accounting period, you generally need to obtain an Accountant's Report within six months of the period end. The report is prepared by a qualified accountant who reviews your client account against the rules. You only have to deliver it to the SRA if it is qualified — i.e. it identifies a breach that puts client money at risk.
Some firms are exempt from obtaining a report — broadly, where all client money is held for the Legal Aid Agency, or where the money held is very low (the SRA sets thresholds on the average and maximum balances). If you think you may be exempt, it is worth confirming rather than assuming.
A note on thresholds and detail: the SRA updates figures and guidance from time to time. Treat this article as an orientation, not a substitute for checking the current SRA Accounts Rules — or asking us.
Common breaches to avoid
| Breach | Why it happens |
|---|---|
| Client money paid into the office account | Receipts not identified or banked correctly |
| Overdrawn client ledgers | Paying out more than is held for a client |
| Reconciliations missed or late | No routine, or differences left uninvestigated |
| Withdrawals without proper authority | Weak controls over who can move client money |
| Residual balances left unreturned | Small client balances never cleared down |
Staying compliant, in practice
Most breaches are not dishonesty — they are the product of a busy practice without a specialist keeping the client account in order. The firms that stay comfortably compliant tend to have three things in place: prompt, accurate cashiering; a genuine reconciliation every few weeks with differences chased down; and an accountant who knows the rules preparing the year-end and the report.
That is exactly what we do for solicitors and law firms — from day-to-day legal bookkeeping and cashiering through to the Accountant's Report.