SRA Accounts Rules: client money, reconciliations and reports

Current version

In effect from 25 November 2019

Applies to

SRA-authorised firms, their managers and employees

Reconciliations

At least every five weeks (rule 8.3)

Overseen by

The COFA (Code for Firms, paragraph 9.2)

What are the SRA Accounts Rules?

The SRA's rules for firms that receive or deal with money belonging to clients, including trust money and money held for third parties. The current version has been in effect since 25 November 2019. The SRA expects systems and controls that fit how much client money you hold and how many transactions you handle.

There are 13 rules, covering client money and client accounts, joint accounts and clients' own accounts, accountants' reports, and keeping records.

Who do the Accounts Rules apply to?

Every firm the SRA authorises, including sole practices, and the firm's managers and employees (rule 1.1). The managers are jointly and severally responsible for compliance by the firm and everyone in it (rule 1.2). In an alternative business structure the rules apply only to the work the SRA regulates.

What counts as client money?

Under rule 2.1: money you hold or receive for legal work you do for a client, money held for a third party (for example as stakeholder), money held as a trustee or in an office such as a Court of Protection deputy or attorney, and money for your fees and unpaid disbursements received before you've billed for them.

Client money goes promptly into a client account (rule 2.3), is available on demand (rule 2.4) and goes back promptly once there's no proper reason to hold it (rule 2.5).

If the only client money you take is for your fees and for disbursements you're liable for, and you have no client account for any other reason, rule 2.2 lets you hold it outside a client account, as long as you tell the client in advance where and how it will be held.

What are the rules on client accounts?

A client account must be with a bank or building society in England and Wales, and its name must include the firm's name and the word "client" (rule 3). The rest comes down to a few working rules:

1. 01Keep client money separate from the firm's money, and split mixed payments promptly (rule 4).
2. 02Send a bill or written notice of costs before you move client money to pay your fees (rule 4.3).
3. 03Only withdraw client money for its purpose, on instructions or with the SRA's authority, and only if that client's ledger holds enough (rule 5).
4. 04Have every withdrawal properly authorised and supervised (rule 5.2).
5. 05Never let the client account act as a bank for clients or anyone else (rule 3.3).
6. 06Pay clients a fair sum of interest, unless you agree something else in writing (rule 7).
7. 07Put breaches right as soon as you find them, and replace any missing money immediately (rule 6).

How often must client accounts be reconciled?

At least every five weeks. Rule 8.3 requires a reconciliation of the bank statement balance, the cash book and the total of the client ledgers for every client account, signed off by the COFA or a manager. Investigate and resolve any differences promptly.

Behind that sit the records in rule 8: client ledgers by client and matter, a running list of client balances, a client cash book, bank statements at least every five weeks, and a central record of every bill. Keep accounting records securely for at least six years (rule 13).

When does a firm need an accountant's report?

If you held or received client money in an accounting period, or operated a joint account or a client's own account as signatory, you must get an accountant's report within six months of the period's end (rule 12.1). For now you only send it to the SRA if it's qualified, meaning client money is or may have been put at risk.

You don't need one if all your client money came from the Legal Aid Agency, or if your client account balance averaged no more than £10,000 and never went above £250,000 in the period (rule 12.2). The SRA's guidance works out both figures from your reconciliations. A firm holding money only under rule 2.2 doesn't need a report.

Changes due from April 2027

The Legal Services Board approved changes on 31 July 2026. Firms that must get a report will have to send it to the SRA whether or not it's qualified, firms relying on an exemption will have to declare it, and late or missing reports can bring fixed penalties. The SRA is due to confirm the timetable.

What does the COFA do?

The COFA (compliance officer for finance and administration) must take all reasonable steps to make sure the firm, its managers and employees keep to the Accounts Rules, that serious breaches are reported to the SRA promptly, and that the SRA hears promptly about anything it should know (paragraph 9.2 of the SRA Code of Conduct for Firms).

Day to day, that means watching the reconciliations, recording breaches and judging which are serious. The SRA is clear that the COFA doesn't replace the managers' own responsibility. Our COLP guide covers how the two compliance roles split and who can hold them.

What are the most common Accounts Rules breaches?

The SRA's warning notices and its guidance for reporting accountants point to the same problems:

1. 01Using the client account as a banking facility: moving money with no proper link to your legal work, or holding it after the matter ends.
2. 02Shortfalls: money missing from the client account and not replaced at once. The managers must replace it, from their own resources if they have to.
3. 03Reconciliations not done, not done every five weeks, or signed off without the differences being looked into.
4. 04Taking costs from the client account without first sending a bill or written notice of costs.
5. 05Old balances left on closed matters instead of going back to the client.
6. 06Accounting records that are incomplete, unreliable or not kept for six years.

The SRA has published warning notices on the first two. It calls rule 3.3 a first line of defence against money laundering, so treat any request to move money for no clear reason as a question for your MLRO.

Where can software and AI help?

Most firms keep these records in their practice management or accounts system, which should produce the ledgers, cash book and reconciliation the rules ask for. Our guide to practice management software lists what to check.

AI can help at the edges, such as drafting letters to clients with old balances or summarising unreconciled items for review. Authorising payments and signing off reconciliations stay with people.