Government commissioned research reveals how firms benchmark interest thresholds for clients
As interest rates have risen, increased attention has focused on the thresholds law firms apply before returning interest to clients. New research commissioned by the Ministry of Justice provides a detailed snapshot of how firms in England and Wales are currently setting and benchmarking their de minimis policies.
The study, conducted independently by Pye Tait Consulting, examines how law firms manage interest accrued on general client accounts and the minimum amounts they require before repayment to clients is triggered. The findings show that a majority of firms continue to operate a formal threshold approach.
According to the research, 55 percent of law firms set a de minimis threshold. This is defined as a minimum amount of accrued interest above which firms will consider paying interest back to clients. While the practice is more common among medium and large firms, it remains the prevailing approach across the sector as a whole.
In terms of value, the research identifies a clear point of convergence. The most frequently cited de minimis amount is £20, a figure that has remained unchanged from three years ago. This is despite a period of significant change in interest rate conditions, during which interest accrual on client funds has increased materially.
However, the report also shows that £20 does not tell the full story. When all responses are averaged, the mean de minimis threshold across firms stands at £38. This indicates that while many firms retain the traditional benchmark, a growing number now operate at higher thresholds.
The research highlights notable variation based on firm structure. Firms licensed as Alternative Business Structures report a significantly higher mean de minimis amount of £59, compared with £35 among firms that are not licensed as Alternative Business Structures. This divergence suggests that differences in ownership and governance models may influence how firms approach interest repayment thresholds.
Differences also emerge when competition and market position are taken into account. Firms reporting higher levels of competition tend to set higher de minimis amounts than those operating with little or no competitive pressure, although the most commonly cited benchmark remains unchanged.
The report does not seek to assess whether any particular threshold is appropriate or compliant. Instead, it documents how firms justify their current policies. Many respondents reference regulatory guidance when determining their de minimis level, while others cite the need to recover administrative costs associated with managing client money.
Taken together, the findings provide firms with a clear view of prevailing practice across the market. As interest rates remain elevated compared with recent history, the research highlights how longstanding norms around de minimis thresholds are being maintained, even as wider scrutiny of client money handling continues to increase.