The deadline to have your say on the Ministry of Justice’s plans to use lawyer’s client account interest to fund access to justice has been extended by four weeks to 9th March, from 9th February.
The MoJ has signalled it could target interest on client accounts in its recent client money consultations, describing the potential revenue as “a crucial source of funding” to support and enhance services in the justice system.
The proposals would see the introduction of an Interest on Lawyers’ Clients Accounts Scheme (ILCA) which will remit a proportion of the interest earned on client accounts in England and Wales, including third party managed accounts, to the government. Firms would retain a portion of the remaining interest, which would continue to be subject to existing sectoral rules on client interest.
The government has pointed to other jurisdictions where collecting interest on the accounts is common practice as evidence of its potential.
Writing in the foreword to the consultation document, David Lammy, the secretary of state for justice, said law firms should contribute to strengthening justice. “We are carrying out this consultation to understand how the legal profession can support our shared goal: a justice system that is fair, accessible and fit for purpose,” he said.
“Currently, many firms retain interest generated on client accounts as income. 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.”
Under the proposals, law firms would be required to hold client money in accounts that meet stipulations set out under the scheme, managed by a scheme administrator, which the government proposes should be the Ministry of Justice. “Delivering the scheme ‘in-house’ ensures timely implementation and minimises unnecessary complexity and cost to the public purse,” the consultation document explains.
Requirements for firms include periodically collecting appropriate interest from the client account to send to the scheme administrator, calculating interest daily and crediting it to the account periodically, and offering a rate of interest comparable to other interest-bearing banks.
The legal service provider will be required to provide account information to the scheme administrator as required for enforcement activities, and the client account may be required to be held with a provider that is able to host an administrator account within the same bank or institution. Sanctions would be introduced for providers that do not adhere to the scheme’s requirements.
Membership groups have been critical of the plans with the Law Society warning the introduction of ILCA could see more firm failures and an increase in costs to service users. Speaking in December at the launch of the consultation, Law Society president Mark Evans said.
“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, undermining the UK government’s efforts to achieve growth and revitalise local economies.”
Conveyancing body The Conveyancing Association was similarly critical of the plans: “The Conveyancing Association does not support the approach set out in this consultation,” Nicky Heathcote, non-executive chair at the CA, said.
“Client account interest is not a spare source of funding that can be taken without consequence. For many firms, this income helps cover the real and rising costs of running compliant client accounts, including banking charges, systems, audits and controls that protect consumers. Removing or redirecting that income risks pushing costs back onto clients or making some conveyancing service models unworkable.
“We are also concerned by the very short timeframe provided to respond. Meaningful consultation needs time for firms to assess the impact on their businesses and on consumers, and to respond properly. While the sector has engaged constructively on this issue, and the CA has already fed into the MoJ, the pace of this process makes it harder for firms to provide full evidence and practical insight. We will consider our response carefully, but it is vital that the real world experience of conveyancers is fully reflected to avoid unintended harm.”
The consultation has been extended until 11.59pm on 9th March 2026.
Open consultation: Interest on Lawyers’ Client Accounts Scheme
