If your firm handles client money, the Solicitors Accounts Rules still set the standard for how you record, reconcile and report it. The core duties remain familiar, yet the Solicitors Regulation Authority (SRA) has refreshed guidance, highlighted focus areas and progressed workstreams that affect how you prepare for your accountant’s report in 2025. This guide summarises what has changed, what is under review, and how to stay audit-ready all year round.
The rules have not been rewritten, but guidance matters
The Accounts Rules themselves continue to apply as published, with the five-week reconciliation requirement, the duty to obtain an accountant’s report where you are not exempt, and clear expectations on record keeping and treatment of client funds. What is shifting in 2025 is the emphasis within guidance and the SRA’s communications, which influence what your reporting accountant will expect to see and what the regulator will pay close attention to, especially in larger and mid-sized firms across England and Wales.
Accountant’s reports: process updates and practical reminders
The SRA’s central page for accountants’ reports was updated in 2024 and remains the anchor for what must be submitted, when to notify period-end changes and how to handle qualified reports or waivers. Ensure your internal timetable aligns with these expectations and that your evidence pack is complete well before the six-month deadline. If your report is qualified, you must submit it within six months of the period end, and you should retain supporting financial documents for at least six years. Your reporting accountant will expect reconciliations, client ledger listings, breach logs, and explanations to be ready on request, reflecting best financial management practices.
Exemption: check you still qualify
The exemption from obtaining an accountant’s report remains available where the criteria are met, for example, where you held or received client money only in minimal circumstances. Many firms, including sole practitioners and smaller firms, sometimes assume exemption continues automatically, but small operational changes can take you outside the threshold. Reassess the exemption at least annually and document your rationale so the COFA and partners are comfortable with it still applying. If in doubt, treat your firm as in scope and plan accordingly, especially if your firm is experiencing rapid growth or mergers.
Residual client balances: continued scrutiny and a clear process
Residual balances remain a frequent finding in SRA audits. In practice, the SRA expects prompt attempts to return funds and a documented route for balances that cannot be returned. Where a residual balance exceeds £500, you must apply to the SRA for authority to withdraw and pay to charity, supported by evidence of your tracing steps. This is an area the regulator continues to signpost and enforce, so a monthly residuals report and an action trail are essential for all law firms, from national to large law firms with complex client bases.
Five-week reconciliations: non-negotiable and actively enforced
Rule 8.3 of the Accounts Rules requires reconciliation of all client accounts at least every five weeks, with differences investigated and resolved and the record signed off by the COFA or a manager. Enforcement outcomes through 2024 and 2025 continue to cite this rule explicitly. From an audit process perspective, expect questions where reconciliations are late, prepared but not reviewed, or carry aged differences forward. Build a month-end rhythm that treats reconciliations as a fixed milestone, not a best effort, to ensure compliance and maintain financial performance.
Interest on client money: keep policy current and applied
Interest treatment continues to attract attention. Your policy should be written in plain language and applied consistently, with periodic file tests to confirm compliance. Firms should be ready to justify thresholds, methods and exceptions, and to demonstrate that interest owed to clients has been credited. Where your policy relies on a de minimis threshold, apply it consistently and record decisions. This is especially relevant for firms with diverse practice areas, such as personal injury or commercial legal services.
Third-party managed accounts: useful tool, ongoing risk
Third-party managed accounts (TPMAs) can reduce the need to hold client money directly, but they are not a compliance shortcut. The SRA’s guidance remains clear: risks persist and responsibility rests with the firm. If you use a TPMA, you still need robust oversight, clear records, and reconciliation of the information provided by the TPMA provider. Treat TPMA arrangements as part of your control environment, not as a way to step outside it, ensuring your firm’s policies align with regulatory requirements.
Wider regulatory signals to note in 2025
Two broader items are worth tracking this year. First, the SRA has continued its consumer-protection workstreams and updates, which, while not Accounts Rules changes, point to a steady focus on client outcomes and transparency. Second, the SRA introduced varying publication periods for disciplinary outcomes from June 2025, reinforcing the reputational dimension if serious breaches occur. Strong controls around client money remain your best defence against regulatory and reputational risk within the legal profession.
What your reporting accountant will expect to see
Your accountant’s programme in 2025 will be evidence-led. Expect requests for:
- Bank statements for all client accounts covering the period under review, plus reconciliations for each period with preparer and reviewer sign-offs.
- Client ledger totals that agree with the control account, and an explanation for any differences.
- A residual balances report with documented attempts to return funds and, where needed, SRA permissions for sums over £500 paid to charity.
- Your written interest policy and file tests showing it is applied.
- A breach register and actions log with dates, owners and closure evidence.
- Evidence of COFA oversight, for example, monthly packs and meeting notes.
These requirements apply to law firms of all sizes, from sole practitioners to large law firms, ensuring consistent standards across the legal sector.
Year-round habits that make 2025 audits easier
It is easier to meet 2025 expectations when the routine is consistent and straightforward:
- Monthly reconciliations for client accounts, even though the rule is five weeks, because monthly cycles align with wider finance processes.
- Residuals review every month, with attempts logged and actions followed through to closure.
- Interest testing quarterly on a small, rotating sample.
- Breach and action logs were updated promptly, reviewed at COFA meetings, and closed on time.
- COFA monthly pack covering reconciliations, aged reconciling items, residual balances, interest tests and open actions.
- Quarterly internal review of files and controls, with findings briefed to partners and actions tracked to completion.
This cadence smooths your year, reduces audit queries and makes it straightforward to demonstrate compliance, improving your firm’s financial reporting and overall risk profile.
Practical red flags to fix before your next audit
Several issues still trigger avoidable questions:
- Reconciliations prepared but not independently reviewed, or differences that roll forward.
- Transfers between client and office accounts without a clear basis, narrative or approval.
- Mixed receipts posted to a single account without proper split.
- Residual balances older than three to six months with no recorded tracing attempts.
- Interest policy is present on paper but not applied in practice.
- Gaps between your case system and the nominal ledger that are not reconciled.
Fixing these before your reporting period will save time and reduce the risk of a qualified final report.
Action plan for partners and the COFA in 2025
Turn the regulatory signals into a short, practical plan:
- Reconfirm exemption status, or plan for an accountant’s report with a clear timetable.
- Refresh the month-end checklist to include reconciliations, residuals, interest tests and breach logging with named owners.
- Tidy residual balances, documenting attempts and, where needed, applying for SRA permission for sums over £500.
- Update and circulate the interest policy, test a sample and record results.
- Prepare the COFA monthly pack and hold a short review meeting with a written action list.
- Schedule a light internal review a quarter before year-end to surface issues early.
- Organise audit evidence in a standard digital folder so requests are easy to meet.
How we help firms navigate SRA audits
We work with solicitors nationwide to prepare for and complete SRA audits, clear residual balances efficiently, and build a monthly rhythm that meets the Accounts Rules without overloading your team. If you want assurance before year-end, our independent Internal Control Review mirrors the key tests your reporting accountant will perform and gives your COFA a focused action plan. For broader governance and reporting, our Audit and Assurance team aligns controls with practical finance routines. If you would like a realistic timetable for your 2025 report, contact us, and we will set this up with you.
Key takeaway for 2025
There has not been a wholesale rewrite of the Accounts Rules. Still, the SRA’s guidance and communications emphasise timely reconciliations, active management of residual balances, consistent interest policies, and clear evidence of COFA oversight. Firms that build these habits into their month-end and keep tidy, accessible records will find the 2025 accountant’s report straightforward and low-stress. With the proper routine, ensuring compliance becomes an advantage, not just an obligation, helping your firm maintain its reputation and financial integrity in the competitive legal services market.