The MOJ has just published a consultation paper on this proposal. Deadline for submitting responses is 9th February 2026.

They are clearly look at where they can raise money to improve the Justice System. There can be little disagreement that it needs to be improved. Currently interest earned on Client Account (not Separate Designated Accounts) is often taken by solicitors firms and put into the pot of income for the firm. Interest earned on Separate Designated Client Accounts is sent to clients. The MOJ is proposing that banks pay direct to HMRC a) 75% of the interest earned on the general Client Accounts and b) 50% of the interest earned on the Separate Designated Accounts. We will have to see if this goes through. We think that a) will and there is a good chance that b) will as well.

There will be regulatory and contractual issues to be surmounted. The SRA (and any other regulators concerned) will have to give guidance. How quickly this happens is anyone's guess, but we suspect the government will want to get on with this ASAP so that the effects of an improcved justice system will be apparent in good time for the next election. One plus is that the banks will pay direct to HMRC, rather than your accounts department having to work out the calculations.

Some firms will not be affected because they do not have cient account or hold little client money. For others this proposal could have a major impact upon profitability. They will need to be making contingency plans now so as not to face finacial difficulties.

Here is a link to where you may access the consultation document: https://www.gov.uk/government/consultations/interest-on-lawyers-client-accounts-scheme/interest-on-lawyers-client-accounts-scheme#introducing-an-interest-on-lawyers-client-account-scheme-ilca

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