New MoJ consultation proposes redirecting client account interest to fund courts and legal aid
The Ministry of Justice has launched a consultation on a proposed new scheme that would redirect a significant proportion of interest earned on lawyers’ client accounts to help fund the justice system in England and Wales.
The proposal, known as the Interest on Lawyers’ Client Accounts scheme, or ILCA, would require legal service providers to remit part of the interest generated on client funds to the Government. The Ministry says the initiative is intended to create a sustainable funding stream in response to severe pressures and years of underinvestment across criminal and civil justice services.
Under the proposals set out in the consultation, different remittance rates would apply depending on how client money is held. For pooled client accounts, which typically contain small sums held for short periods, the Government is consulting on remittance rates ranging from 75 percent to 100 percent of the interest generated.
For individual client accounts, the proposed remittance rate is 50 percent. The Ministry says this lower rate reflects the higher administrative costs associated with these accounts and the fact that they often hold larger sums for longer periods, such as during probate or property transactions.
Funds held in third party managed accounts are also intended to fall within the scope of the scheme. The stated aim is to ensure a level playing field across the legal services market, regardless of the structure used to hold client money.
The Ministry of Justice points to international precedent for the approach. Similar schemes have operated for decades in jurisdictions including the United States, Canada, Australia and France. In those systems, interest generated from pooled client funds is used to support access to justice, legal aid and related services.
In England and Wales, the consultation states that funds raised under the ILCA scheme would not initially be ringfenced for specific projects. Instead, the money would be directed to areas of greatest need across the justice system, including courts, tribunals and legal aid.
The scheme would apply to all legal service providers regulated under the Legal Services Act 2007. While research commissioned by the Ministry in 2024 found that most firms are not reliant on client account interest to remain financially sustainable, the Government acknowledges concerns from legal aid providers who may use such interest to cross subsidise their work.
To support implementation, firms would be required to hold client money in accounts that meet specific scheme requirements. These include offering interest rates comparable to similar commercial products. The Ministry is also exploring whether interest could be collected automatically, potentially remitted directly from banks to a scheme administrator to reduce administrative burdens on firms.
Regulators, including the Solicitors Regulation Authority, would continue to set rules governing how any remaining interest not captured by the scheme is handled or returned to clients.
The consultation runs from 7 January 2026 to 9 February 2026, with views sought from legal practitioners, regulators, banks and consumer groups.