You take the instructions, do the work, raise the bills and tick the reconciliation. You are also the COLP and the COFA, because the rules require both and there is nobody else to designate. We take the accounting half of that off you.
A sole practice is a distinct authorisation category, not a smaller version of a firm. Rule 1.1(c) of the SRA Authorisation of Firms Rules makes a solicitor or registered European lawyer who is the sole principal eligible to apply for authorisation as a recognised sole practice. What follows from that is the part people underestimate: a recognised sole practice is an authorised body, and every obligation that attaches to an authorised body attaches to you personally.
Rule 8.1 requires the body at all times to have an individual designated as its COLP and an individual designated as its COFA, both approved by the SRA. In your practice those are the same person, and that person is the same person who does the fee earning, sets the billing policy and signs the cheques. The SRA does not reduce what either role carries because one head wears both hats.
Rule 8.3 requires you to complete, at least every five weeks and for all client accounts you hold or operate, a reconciliation of the bank or building society statement balance with the cash book balance and the client ledger total — and the record of it must be signed off by the COFA or a manager of the firm. Three figures, agreed. Any differences investigated and resolved promptly.
In a sole practice the COFA and the manager are you, so the sign-off is your signature on your own work. That is precisely why it is worth having the reconciliation prepared by somebody outside the practice: not because the rule demands it, but because a signature only means something if the person signing has something independent to sign. It is also the single most useful thing we do for sole practitioners, and the thing most likely to keep a reporting accountant's findings at zero.
Around it sit the supporting records: Rule 8.1 client ledgers by client name and matter description with the client and business sides kept separate, a list of all client ledger balances with a running total, and a cash book with a running total; Rule 8.2 statements at least every five weeks for all client and business accounts; Rule 8.4 a readily accessible central record of every bill or written notification of costs; and Rule 13 six years of secure retention. Our reconciliation guide walks the whole process, and the client account health check will tell you in five minutes whether anything is missing.
The rule 2.2 route
A growing number of sole practices simply do not operate a client account, and the Accounts Rules expressly allow it in defined circumstances. Under Rule 2.2, if the only client money you hold or receive is money in respect of your fees and unpaid disbursements received before you have delivered a bill for them, and any money held for disbursements relates to costs for which you are yourself liable, and you do not otherwise maintain a client account, then you are not required to hold that money in a client account — provided you have told the client in advance where and how the money will be held.
Where that applies, rules 2.3, 2.4, 4.1, 7 and 8.1(b) and (c) do not apply to that money, and neither does Rule 12. Rule 12 is the Accountant's Report. That is the whole attraction, and it is entirely proper.
It is a decision about how the practice takes money in, not a filing trick. The moment you receive money that is not covered by rule 2.1(d) — a completion, a settlement, a deposit, money held as stakeholder, anything held as a trustee or attorney — you are holding client money and the full framework applies again, from that day. It works best for practices whose work simply never involves holding other people's money, and it needs the client care letter to say where the money will be held before it arrives.
If you do hold client money, Rule 12.1 requires you to obtain an accountant's report within six months of the end of your accounting period, and to deliver it to the SRA within the same six months only if it is qualified to show a failure that puts client or third party money at risk. The trigger is wider than most people assume: it catches you if at any time in the period you held or received client money, or operated a joint account, or operated a client's own account as signatory.
Rule 12.2 is the exemption. No report is needed if all client money received in the period came from the Legal Aid Agency, or if the statement or passbook balance of client money did not exceed an average of £10,000 and a maximum of £250,000. Both limbs of that second test, not either. The average is calculated by summing all your reconciliation balances and dividing by the number of reconciliations, and the balance measured is the total across all client accounts plus any joint accounts and clients' own accounts you operate. Our guide to the Accountant's Report works the arithmetic through.
Client account bookkeeping and the five-weekly three-way reconciliation. The firm's annual accounts, the partnership or corporation tax return, partner tax reserves and drawings, payroll, VAT and the management figures you run the firm on. All the preparation that decides whether the report is clean.
Buzz Accounting Ltd is licensed by the AAT and a member of the ICPA. It is not a chartered accountancy firm and not a registered auditor.
Colin Ellis, ICAEW and a Responsible Individual, prepares and signs the SRA Accountant's Report itself. Rule 12.5 of the SRA Accounts Rules requires a member of ICAEW, ICAS, ACCA or ICAI who is, or works for, a registered auditor — and only that person can sign it.
Anstey Bond LLP is a separate firm, registered for audit by the ICAEW. Companies House OC360626.
Cover, and cost
The SRA's minimum terms and conditions for professional indemnity insurance set the sum insured for any one claim, exclusive of defence costs, at at least £3 million where the insured firm is a relevant recognised body or a relevant licensed body, and at least £2 million in all other cases. A sole practitioner falls in the second group, as does a traditional partnership in which none of the partners is a company or an LLP. An LLP or a limited company is on £3 million.
Two other features of the minimum terms matter more than the headline figure. There is no monetary limit on defence costs, which is why the sum insured is not the whole picture. And cessation triggers six years of run-off cover, which has to be paid for at a point when the practice has stopped earning. For a sole practitioner that run-off obligation is frequently the number that decides when retirement is affordable, and it is worth modelling years before you need it. The trade-offs between structures are set out on LLP versus limited company.
An unincorporated sole practice is taxed as a sole trader. Income tax runs at 20% on the first £37,700 of taxable income, 40% up to £125,140 and 45% above it, with a personal allowance of £12,570 that tapers away by £1 for every £2 of income over £100,000. Class 4 National Insurance runs on the same profits at 6% between £12,570 and £50,270 and 2% above. The marginal cost of an extra pound of profit is therefore 42% above £50,270 and 47% above £125,140 for 2026/27. Those thresholds are frozen until 5 April 2031, following the extension announced at Budget 2025 on 26 November 2025.
Two dates then run your cash flow. Payments on account fall on 31 January and 31 July, set by reference to the year just filed, which is why a good year is followed by an uncomfortable January. And Making Tax Digital for Income Tax applies to you: from 6 April 2026 where qualifying income exceeds £50,000, tested on the 2024/25 return; from 6 April 2027 above £30,000; from 6 April 2028 above £20,000. Partnerships and LLPs are not in scope and HMRC has not set a date for them, so a sole practitioner is in MTD while an equity partner in a larger firm may not be — see LLPs and partnerships.
Basis period reform is still working through the numbers too. Everyone unincorporated moved to a tax-year basis from 2024/25, and transition profit after overlap relief is spread across five tax years from 2023/24 to 2027/28, with at least 20% taxed in 2023/24 and the remainder spread equally over the following four. If your accounting date is not 31 March or 5 April you are still carrying an extra slice of profit in 2026/27 and 2027/28. It belongs in the reserve, and it is the item most often left out of a sole practitioner's own forecast.
Sole practitioners rarely need more people involved. They need fewer, doing more.
Ledgers maintained, the five-weekly three-way reconciliation prepared for your sign-off, and transfers evidenced against bills.
Client account bookkeepingWhether you need one, whether you are exempt, and if you need one, arranging it with a registered auditor and preparing everything for it.
SRA Accountant's ReportPractice accounts, your self assessment, payments on account forecast in advance, and quarterly MTD updates from digital records.
Accounts and taxWhat Xero can and cannot do alongside a case management system, and the set-up that keeps client money where the rules require it.
Xero for law firmsYour secretary, your paralegal, your part-time bookkeeper — payroll and auto-enrolment handled with the rest of it.
Law firm payrollReport deadline, practising certificate renewal, self assessment, VAT and payroll — on one calendar, chased before they arrive.
The law firm calendarYes, and both are you. Rule 8.1 of the SRA Authorisation of Firms Rules requires an authorised body at all times to have an individual designated as its COLP and an individual designated as its COFA, whose designations the SRA has approved. A recognised sole practice is an authorised body, so the requirement applies in full. Rule 8.2 says the individual must be a manager or employee of the body, must consent to the designation and must not be disqualified under section 99 of the Legal Services Act 2007. Only the COLP has to be authorised to carry on reserved legal activities. There is no requirement anywhere that a COFA holds an accountancy qualification.
Sometimes, and rule 2.2 is the route. If the only client money you hold or receive is money for your own fees and unpaid disbursements received before you deliver a bill, and any money held for disbursements relates to costs you are yourself liable for, and you do not otherwise maintain a client account, then you need not hold that money in a client account — provided you have told the client in advance where and how it will be held. Rules 2.3, 2.4, 4.1, 7 and 8.1(b) and (c), and rule 12 itself, then do not apply to that money. It is a structural decision about how you take money in, not a workaround, and it stops the moment you receive anything else.
You do. Rule 8.3 requires the record of the reconciliation to be signed off by the COFA or a manager of the firm, and in a sole practice both descriptions point at the same person. That is not a reason to treat the sign-off as a formality — it is the reason to have someone outside the practice preparing the reconciliation, so that the signature means something. The reconciliation itself has to agree three figures at least every five weeks: the bank or building society statement balance, the cash book balance and the client ledger total. A two-way reconciliation that stops at the cash book does not comply, however neatly it is presented.
The SRA's minimum terms and conditions set the sum insured for any one claim, excluding defence costs, at at least £3 million where the insured firm is a relevant recognised body or relevant licensed body, and at least £2 million in all other cases. A sole practitioner sits on the £2 million minimum, as does a traditional partnership where none of the partners is a company or an LLP, while an LLP or a limited company is on £3 million. There is no monetary limit on defence costs, and cessation triggers six years of run-off cover. That run-off obligation is often the number that decides when and how a sole practitioner can retire.
If your sole practice is unincorporated then you are a sole trader for tax and yes, on the same timetable as everyone else. It applies from 6 April 2026 where qualifying income exceeds £50,000, tested on the 2024/25 return, from 6 April 2027 above £30,000 tested on 2025/26, and from 6 April 2028 above £20,000 tested on 2026/27. This is one of the sharpest differences between you and a partner in a firm down the road: partnerships and LLPs are not in scope at all and HMRC has not set a date, so an equity partner with a large profit share may have no MTD obligation while you do.
A partial exemption is proposed for smaller sole owner-manager firms from the requirement that significant decision-makers cannot also hold the COLP and COFA roles, which is the part that would otherwise be impossible for you to satisfy. The rest of the package would still land: every firm holding client money submitting its annual accountant's report rather than only qualified ones, a mandatory annual declaration as the COFA's responsibility, reporting accountants submitting directly to the SRA, and fixed penalties for late or non-submission. The SRA announced on 2 June 2026 that it has submitted the package to the Legal Services Board, and expects it in force by early 2027, subject to approval.
A free conversation about your client account, your report position and your tax dates. We act only for law firms, so you will not spend the first half hour explaining what a client ledger is.
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