In short
The SRA Accounts Rules are the 13 rules that govern how firms regulated by the Solicitors Regulation Authority handle client money. They define client money, require it to be held in a client account at a bank in England and Wales apart from the firm's own money, limit withdrawals, require a fair sum of interest, a reconciliation at least every five weeks and, for most firms, an annual accountant's report.
Key takeaways
- The SRA Accounts Rules apply to SRA-authorised firms, their managers and their employees, and the managers are jointly and severally responsible for the firm's compliance.
- Client money includes money held for clients, money held for third parties such as stakeholder money, money held as a trustee or attorney, and fees and unpaid disbursements received before a bill is sent.
- Client money must be paid promptly into a client account at a bank or building society in England and Wales, must be available on demand, and must be returned promptly once there is no proper reason to hold it.
- Every client account must be reconciled at least every five weeks against the cash book and the client ledgers, and the record signed off by the COFA or a manager.
- Firms that held client money in an accounting period must obtain an accountant's report within six months of the period end, unless an exemption applies.
What the SRA Accounts Rules are and who they apply to
The SRA Accounts Rules are the rules the Solicitors Regulation Authority (SRA), the regulator of solicitors and law firms in England and Wales, sets for handling money that belongs to clients and other people. The current version took effect on 25 November 2019 and replaced a much longer rulebook. The SRA's power to make accounts rules and to require accountants' reports comes from sections 32 and 34 of the Solicitors Act 1974.
Rule 1 says the rules apply to authorised bodies, which means firms authorised by the SRA, and to their managers and employees. A manager is a partner, member or director. Rule 1.2 makes the managers jointly and severally responsible for compliance, so each partner can be held responsible for the whole firm's position, not only their own matters. Day-to-day oversight sits with the COFA, the Compliance Officer for Finance and Administration, whom every authorised firm appoints. Under paragraph 9.2 of the SRA Code of Conduct for Firms the COFA must take all reasonable steps to make sure the firm complies with the Accounts Rules and that serious breaches are reported to the SRA promptly.
The 13 rules at a glance
The rules are short. Most of the detail sits in SRA guidance and warning notices, which explain how the SRA reads words such as 'promptly' and 'fair'. The table below sets out what each rule requires in one line, so a COFA or finance director can see the whole framework before going into detail.
| Rule | Subject | What it requires |
|---|---|---|
| 1 | Application | Applies to authorised firms, their managers and employees; managers are jointly and severally responsible |
| 2 | Client money | Defines client money; pay it promptly into a client account, keep it available on demand and return it promptly |
| 3 | Client account | Hold client accounts at a bank or building society in England and Wales; name must include the firm and the word 'client'; no banking facilities |
| 4 | Keeping money separate | Keep client money apart from the firm's money; allocate mixed payments promptly; send a bill before taking costs |
| 5 | Withdrawals | Withdraw only for the purpose held, on instructions, or with SRA authority; authorise and supervise every withdrawal; never overdraw a client |
| 6 | Correcting breaches | Correct breaches promptly; replace money improperly withdrawn immediately |
| 7 | Interest | Account to clients and third parties for a fair sum of interest, unless a different arrangement is agreed in writing |
| 8 | Records and reconciliation | Keep client ledgers, a list of balances and a cash book; obtain statements and reconcile at least every five weeks |
| 9 | Joint accounts | Only the statement and bills record requirements apply |
| 10 | Client's own account | Statements, reconciliations and the bills record apply where the firm is a signatory |
| 11 | Third party managed accounts | May be used only if the firm never receives or holds the client's money and the client understands the terms |
| 12 | Accountant's reports | Obtain an annual report within six months of the period end unless exempt; deliver a qualified report to the SRA |
| 13 | Storage of records | Store accounting records securely for at least six years |
Rule 2: what counts as client money
Rule 2.1 lists four kinds of client money. The fourth is the one firms most often get wrong: money received for fees and unpaid disbursements before a bill is sent is client money, so a payment on account of costs belongs in client account until the firm has billed for it. A disbursement is a cost the firm pays to someone else on the client's behalf, such as a search fee or a medical report.
Rule 2.2 gives a narrow exception. If the only client money a firm ever receives is fees and disbursements under rule 2.1(d), the disbursements are costs the firm itself is liable for, the firm keeps no client account for any other reason, and it has told the client in advance where and how the money will be held, it need not use a client account. Rule 2.3 lets money stay out of client account in three cases: where holding it in client account would conflict with the rules of an office such as a Court of Protection deputyship, where it is a Legal Aid Agency payment for the firm's costs, or where the firm agrees a different arrangement in writing with the client or third party.
| Rule | Type of client money | Everyday example |
|---|---|---|
| 2.1(a) | Money relating to regulated services delivered to a client | Purchase funds sent by a buyer before completion |
| 2.1(b) | Money held for a third party, including as agent, stakeholder or to the sender's order | A deposit held as stakeholder between exchange and completion |
| 2.1(c) | Money held as a trustee or holder of an office or appointment | Funds held as attorney under a power of attorney or as a Court of Protection deputy |
| 2.1(d) | Fees and unpaid disbursements received before a bill is delivered | A £3,000 payment on account of costs at the start of a matter |
Rule 3: the client account and the banking facility ban
A client account must be held at a branch, or the head office, of a bank or building society in England and Wales, and its name must include the firm's name and the word 'client' so that the bank and any insolvency practitioner can tell it apart from the firm's own accounts.
Rule 3.3 is one of the most enforced rules in the book. A firm must not use a client account to provide banking facilities to clients or third parties, and every payment in or out must relate to regulated legal services the firm is delivering. Holding money so a client can pay household bills, routing funds to family members or overseas companies with no link to the legal work, or keeping money after a transaction has finished are all examples the SRA gives in its warning notice. Our guide to SRA Accounts Rules breaches sets out the warning signs in full.
Rule 4: keeping client money separate and taking costs
Rule 4.1 requires client money to be kept apart from the firm's money, which the rules call business money and which sits in the office or business account. When a single payment contains both, for example a cheque covering a bill already sent and money for a future search, rule 4.2 requires the firm to split it promptly into the correct accounts.
Rule 4.3 controls the moment client money becomes the firm's money. Before transferring client money to pay its own costs, the firm must give the client or paying party a bill of costs or other written notice of the costs incurred, and the transfer must be for the exact sum on that bill and covered by the money held for that client. In its 2026 client money consultation the SRA said it will amend the rules to make clear that a bill is not needed to reimburse the firm for expenses it has paid on a client's behalf; until that change is made, firms should apply rule 4.3 as written.
Rules 5 and 6: withdrawals and correcting breaches
Rule 5.1 allows money out of client account only for the purpose for which it is held, on instructions from the client or third party it is held for, or with the SRA's prior written authority or in circumstances the SRA has prescribed. Rule 5.2 requires every withdrawal to be properly authorised and supervised, which in practice means a documented approval limit for each person who can release payments. Rule 5.3 forbids paying out more than is held for that specific client: a payment that takes a client ledger below zero uses other clients' money.
Rule 6.1 requires any breach to be corrected promptly once it is found, and any money improperly withdrawn or withheld to be replaced immediately. The SRA's 2024 warning notice on missing client money says the firm's managers must replace a shortage from their own resources if necessary, whether or not they were personally at fault.
Rules 7, 8 and 13: interest, records and reconciliation
Rule 7 requires the firm to account to clients and third parties for a fair sum of interest on money it holds for them, unless it agrees a different arrangement in writing after giving enough information for informed consent. Our guide to solicitor client account interest explains how to set a fair interest policy.
Rule 8 sets the record keeping. The firm must keep accurate, contemporaneous and chronological records: a client ledger for each client and matter showing client money on the client side and bills and business money on the business side; a list of all client ledger balances with a running total; and a cash book showing a running total of all client account transactions. It must obtain bank statements for every client and business account at least every five weeks, reconcile every client account at least every five weeks against the cash book and the ledger total, have the COFA or a manager sign off the record, and keep a central record of all bills. The client account reconciliation guide works through this with a full example. Rule 13 requires all accounting records to be stored securely for at least six years.
Rules 9, 10 and 11: joint accounts, client's own accounts and third party managed accounts
Not every account a firm touches is a client account. Where the firm holds money jointly with a client or a third party, or operates a client's own account as a signatory, most of the client account rules fall away, but some record keeping still applies. A third party managed account is an account run by a payment firm that holds money for the client and pays it out on the client's authority, so the law firm never holds the money itself.
Under rule 11 a firm may use a third party managed account only if it does not result in the firm receiving or holding client money, and the client has been told, and understands, the terms, the fees and who pays them, and their right to end the arrangement and to dispute payment requests. The firm must obtain regular statements from the provider and check they reflect every transaction. SRA guidance says the provider must be authorised by the Financial Conduct Authority as a payment institution, or be a small payment institution that has chosen to safeguard money to the same standard.
| Arrangement | Rule | Statements every five weeks | Five-weekly reconciliation | Central bills record |
|---|---|---|---|---|
| Joint account with client or third party | 9 | Yes | No | Yes |
| Client's own account operated as signatory | 10 | Yes | Yes | Yes |
| Third party managed account | 11 | Regular statements from the provider | Check statements reflect all transactions | Not specified |
Rule 12: the annual accountant's report
A firm that held or received client money, operated a joint account or operated a client's own account as signatory at any time in an accounting period must obtain an accountant's report for that period within six months of its end. The report must be prepared by an accountant who belongs to a chartered accountancy body and is, or works for, a registered auditor. A qualified report, meaning one that records a failure to comply that has put or is likely to put money at risk, must be delivered to the SRA within the same six months.
Firms are exempt if all their client money came from the Legal Aid Agency, or if their client account balance stayed within an average of £10,000 and a maximum of £250,000 in the period. In June 2026 the SRA announced, subject to approval by the Legal Services Board, the oversight regulator for legal services, that every firm holding client money will have to submit its report whether qualified or not, with fixed penalties for late or missing reports. The SRA accountant's report guide covers the exemption test, deadlines and the announced changes.
Worked example: a payment on account from receipt to closure
A 12-partner private client firm takes instructions to act in a property dispute and asks for £3,000 on account of costs and disbursements. Because the money is received before any bill, it is client money under rule 2.1(d) and goes into client account. The firm pays a £350 expert report fee from client account for the purpose for which the money is held, then sends a bill for £1,750 plus £350 VAT and transfers exactly £2,100 to its business account. The matter ends, and the £550 left over is returned to the client within days rather than left on the ledger.
Each step maps to a rule, and each leaves a record an accountant can test: the receipt in the cash book and ledger, the authorised payment, the bill in the central bills record, the transfer matching the bill, and the refund. The reconciliation at the end of the five-week period shows the ledger at zero.
Safeheld reconciles client money every day for regulated firms, works every difference to its cause and keeps the record auditors ask for, and is extending that work to law firm client accounts. If your firm holds client money under the SRA Accounts Rules, talk to us about SRA client money.
| Step | Rule | Client account movement (GBP) | Client ledger balance (GBP) |
|---|---|---|---|
| £3,000 received on account of costs | 2.1(d), 2.3 | +3,000.00 | 3,000.00 |
| Expert report fee paid | 5.1(a), 5.2, 5.3 | (350.00) | 2,650.00 |
| Bill sent: £1,750 fees plus £350 VAT | 4.3(a), 8.4 | None | 2,650.00 |
| Transfer of the billed sum to business account | 4.3(b), 4.3(c) | (2,100.00) | 550.00 |
| Balance returned to client at the end of the matter | 2.5 | (550.00) | 0.00 |
Frequently asked questions
What are the SRA Accounts Rules?
They are the SRA's rules for how solicitors and law firms in England and Wales hold, record, reconcile and report client money. The current version took effect on 25 November 2019.
What is client money under the SRA Accounts Rules?
Money held for a client, money held for a third party such as stakeholder money, money held as a trustee or office holder, and fees and unpaid disbursements received before a bill is sent.
How often must a solicitor's client account be reconciled?
At least every five weeks under rule 8.3, comparing the bank statement, the cash book and the client ledger total. The COFA or a manager must sign off the record.
Can a law firm take its fees from client account?
Yes, but only after giving the client a bill or other written notice of the costs, and only for the exact sum billed and covered by money held for that client.
How long must solicitors keep accounting records?
At least six years, stored securely, under rule 13.1.
Who is responsible for compliance with the SRA Accounts Rules?
The firm, its managers and its employees. The managers are jointly and severally responsible, and the COFA must take all reasonable steps to ensure compliance.
References
- SRA Accounts Rules
- SRA Code of Conduct for Firms
- SRA guidance: Third party managed accounts
- SRA consultation: Protecting the client money that solicitors hold
- Solicitors Act 1974, section 32
About Safeheld
Safeheld reconciles client money every day, resolves every difference and prepares every regulatory return for sign-off, for regulated firms in the United States, the United Kingdom, the European Union, Canada, Australia, Singapore and Hong Kong. To discuss your operations, contact us at safeheld.com/contact.
This article is for general information and does not constitute legal or regulatory advice.