Client money rules for accountants

Client money rules require an accountancy firm to keep money it holds for clients in a separate client bank account, confirmed in writing by the bank as client money, and to reconcile it at least every five weeks. The detailed rules come from your professional body, such as ICAEW’s Clients’ Money Regulations or AAT’s Clients’ Money policy. Since 30 June 2026 the Money Laundering Regulations also add duties for firms holding pooled client accounts.

What counts as client money?

Client money is any money, in any currency, that a firm holds or receives for or from a client and that is not immediately due to the firm for its own account. ICAEW’s Clients’ Money Regulations include money held as stakeholder.

These are not client money under ICAEW’s rules:

• Fees paid in advance for clearly identified professional work
• A client’s own bank account that you operate under a written authority
• Cheques made out to the client or to a third party, which you pass on
• Fees paid on account by standing order, which belong in the office account

Common examples are tax repayments paid to the firm and money held to pay a client’s HMRC bill.

Which rules apply to your firm?

The rules that apply depend on which body supervises you. Each body publishes its own set, though they share the same core.

AAT’s policy is based on the ICAEW regulations, so the figures below apply to both. We could not confirm ACCA’s exact wording from its public pages on 6 November 2026, so ACCA members should check the Rulebook. Before holding client money for the first time, check your AAT licence or ICAEW practising certificate conditions first.

The core rules, step by step

The core rules cover how you open, operate and reconcile the account. Follow these steps under the ICAEW and AAT rules.

1. Open a client bank account in the firm’s own name. The bank must record it so it is clear the money does not belong to the firm.
2. Write to the bank. Tell it the money is client money, that it cannot set off the account against the firm’s debts, and that interest goes to the account.
3. Get the bank’s written acknowledgement. ICAEW’s FAQ says that if the bank does not reply within 20 business days, move the money to another bank.
4. Use the account only for your own accountancy work. ICAEW Regulation 8A says payments must relate to accountancy services the firm is performing. ICAEW warned on 28 January 2026 that linked firms sharing one client account breach this rule.
5. Open a designated account for large balances. Do this if you expect to hold more than £10,000 for one client for more than 30 days. Client consent does not override this.
6. Authorise each withdrawal in writing. A principal, or someone a principal has authorised in writing, must sign off every payment out.
7. Reconcile at least every five weeks. Agree total client bank balances to the total of client ledger credit balances. Neither may be in debit.
8. Review compliance once a year. ICAEW Regulation 27 requires an annual compliance review. Keep reconciliation and review records for at least six years.

Can you take your fees from client money?

Yes, but only in set circumstances. ICAEW’s helpsheet allows a withdrawal for fees only if one of these applies:

• the client has agreed the exact amount
• the fee follows a formula agreed in writing
• 30 days have passed since you sent a fee statement and the client has not questioned it

For tax repayments, ICAEW says you do not need written permission if you sent an invoice showing the fee to be deducted at least 30 days before taking it.

What about interest and old balances?

Interest belongs to the client where it would be material. Put the money in an interest-bearing account and credit the interest to the client. You may set a small sum below which no interest is paid, if your engagement letter says so. Our guide to engagement letters for accountants covers the wording.

Untraced balances can go to a registered charity once the client has been untraced for at least five years. For more than £10,000, the charity must give an indemnity against future claims.

The 2026 pooled account rules

The Money Laundering and Terrorist Financing (Amendment) Regulations 2026 (SI 2026/621), made on 9 June 2026, changed the rules for pooled accounts from 30 June 2026. A pooled client account is one where money for several clients sits together.

For new pooled accounts, the bank must understand how you will use the account and assess the risk. As the account holder, you must:

• give the bank, on request, the identities of the people whose money is in the account and their beneficial owners
• keep accurate written records of all money paid in and out for five years
• give law enforcement information about how you manage the account, on request

ICAS said on 11 June 2026 that firms already complying with its Clients’ Money Regulations should not need to change their processes. Fold the pooled account into your AML risk assessment all the same.

What firms should do now

1. Find your bank letters. Confirm you hold a written acknowledgement for every client account.
2. Diarise reconciliations. Set a recurring task at intervals of five weeks or less.
3. Check balances over £10,000. Move long-held large sums into designated accounts.
4. Update client due diligence. Make sure you can name every person whose money sits in a pooled account; our client due diligence checklist helps.
5. Ask whether you need client money at all. Many firms avoid it by having HMRC repay clients directly.

Frequently asked questions

Can an accountant hold client money?

Yes, if their professional body allows it and they follow its client money rules. ICAEW firms follow the Clients’ Money Regulations, and AAT licensed members follow AAT’s Clients’ Money policy.

How often must a client bank account be reconciled?

ICAEW and AAT require a reconciliation at least every five weeks. Differences must be corrected immediately unless they are timing differences.

When do I need a separate designated client account?

Under ICAEW and AAT rules, you need one if you expect to hold more than £10,000 for a single client for more than 30 days.

Do I have to pay interest on client money?

Yes, where the interest would be material. You can agree a small threshold below which interest is not paid, set out in your engagement letter.

What changed for pooled client accounts in 2026?

From 30 June 2026, SI 2026/621 requires holders of new pooled accounts to keep five years of payment records and identify the people whose money is held, if their bank asks.