This guide explains what each stage involves, how they differ, where they fit in the qualification timeline, and what preparation actually looks like for each.

What is the SQE?

The Solicitors Qualifying Examination (SQE) is the centralised assessment that all aspiring solicitors in England and Wales must pass to qualify. It replaced the Legal Practice Course (LPC) from 2021 onwards and is administered by Kaplan on behalf of the Solicitors Regulation Authority (SRA). The SQE applies to all candidates regardless of their degree background — a law degree is no longer a requirement to qualify, as long as you pass the assessments and complete qualifying work experience.

For a complete overview of the full qualification journey — from degree to admission to the roll — see our guide: What is the SQE?

SQE1: Functioning Legal Knowledge

SQE1 is the first stage of the examination. It tests legal knowledge across 13 subjects through multiple choice questions (MCQ). There are two papers:

• FLK1 — Functioning Legal Knowledge Paper 1: Business Law and Practice, Dispute Resolution, Contract, Tort, the Legal System, Constitutional and Administrative Law, and Legal Services.
• FLK2 — Functioning Legal Knowledge Paper 2: Property Practice, Wills and Intestacy, Solicitors Accounts, Land Law, Trusts, and Criminal Law and Practice.

Each paper contains 180 questions, giving 360 questions across the two sittings. The papers are typically sat on consecutive days during a scheduled exam window. SQE1 is marked by Kaplan and results are given as a scaled score. The typical pass mark sits around 56–60%, though this varies by cohort and sitting.

The key thing to understand about SQE1 is that it tests knowledge and application. You are not being asked to draft a contract or interview a client — you are being asked to identify the correct legal answer from four options. That means preparation is fundamentally about building legal knowledge across all 13 subjects and practising the MCQ format intensively.

“SQE1 assesses functioning legal knowledge — candidates must demonstrate knowledge and understanding of the law across the SQE1 functioning legal knowledge areas.”

— Solicitors Regulation Authority, SQE Assessment Specification

This is exactly where Sqewise is built to help. Our Smart Selector serves questions across all 13 FLK1 and FLK2 topics, weighted to your weakest areas so your practice time is always focused on what matters most. Browse all topics on our SQE1 topics page.

SQE2: Practical Legal Skills

SQE2 is the second stage and tests what you can do rather than what you know. It assesses six practical legal skills across five practice areas (property, wills and intestacy, criminal, civil litigation, and business):

• Client interviewing and attendance notes
• Advocacy and oral presentation
• Case and matter analysis
• Legal research and written advice
• Legal drafting
• Written advising

SQE2 is assessed over multiple days through a combination of written tasks and oral assessments in front of assessors. You play the role of a solicitor and are assessed on your ability to handle realistic legal scenarios. You must have passed SQE1 before you can sit SQE2.

Preparation for SQE2 looks very different from SQE1. MCQ practice is irrelevant at this stage. Instead, candidates typically work through skills-focused courses offered by SQE preparation providers, practise mock client interviews, draft real legal documents under timed conditions, and develop advocacy techniques. Some candidates do this through their law school’s SQE2 programme; others use independent providers.

SQE1 vs SQE2: Side-by-Side Comparison

Do You Have to Pass SQE1 Before SQE2?

Yes, without exception. The SRA requires candidates to pass SQE1 before they can sit SQE2. There is no way around this — it is a hard prerequisite. If you fail SQE1, you can resit it, but you cannot sit SQE2 until you have a passing SQE1 result. This is one reason why building a solid SQE1 preparation strategy is so important: it is literally the gateway to the rest of the qualification process.

Where Does Qualifying Work Experience Fit?

Qualifying Work Experience (QWE) — the two years of practical experience required to qualify — can be completed before, during, or after the SQE assessments. It does not need to be a traditional training contract. Paralegal work, internships, placements, and other supervised roles can all count, as long as they are signed off by a solicitor. This flexibility is one of the most significant changes the SQE introduced compared to the LPC route.

How Should You Prepare?

For SQE1, the most effective preparation combines three things: structured revision of all 13 topics, high-volume MCQ practice weighted to your weak areas, and timed mock exams that replicate the real exam format. Sqewise is built specifically for this. Our Smart Selector identifies where your knowledge is weakest and prioritises those topics. When you feel ready, our practice mode serves questions continuously, and Pro subscribers get access to full 90-question timed mock exams.

For SQE2, you will need a different type of provider — one that focuses on practical skills training, live assessments, and feedback. Many law schools and independent SQE prep providers offer SQE2 programmes.

The most important thing is to start SQE1 preparation early, be systematic across all 13 topics, and take full mocks to identify gaps before the real exam. Start practising today on Sqewise — your first 25 questions are free, with no credit card required.

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The Court Hierarchy

Understanding the court hierarchy is essential for applying the doctrine of precedent. In England and Wales, the hierarchy from lowest to highest is:

• Magistrates’ Court / County Court (lowest)
• Crown Court / High Court
• Court of Appeal
• UK Supreme Court (highest domestic court)

The Court of Justice of the European Union is no longer part of the domestic hierarchy following Brexit, though CJEU decisions made before 31 December 2020 are “retained EU case law” and have a special status under the Retained EU Law Act framework.

The Doctrine of Precedent (Stare Decisis)

The doctrine of precedent requires courts to follow the legal reasoning (ratio decidendi) of decisions made by courts of equal or superior jurisdiction. The key rules are:

• The Supreme Court is bound by its own previous decisions, though it can depart from them where it appears right to do so (Practice Statement 1966).
• The Court of Appeal is generally bound by its own previous decisions, subject to narrow exceptions in Young v Bristol Aeroplane Co [1944]: where there are conflicting Court of Appeal decisions; where a previous Court of Appeal decision was made per incuriam (in ignorance of a binding authority); or where the decision is inconsistent with a later House of Lords/Supreme Court decision.
• The High Court is bound by the Court of Appeal and Supreme Court, but not strictly by its own decisions (though it will usually follow them for consistency).

Ratio Decidendi and Obiter Dicta

Only the ratio decidendi — the legal reason for the decision — is binding on lower courts. Obiter dicta (statements made by the way, not essential to the decision) are persuasive but not binding. Identifying the ratio in a complex case can be difficult — it requires extracting the principle of law that was necessary to decide the case on its specific facts.

The classic SQE1 question in this area presents a scenario and asks whether a lower court must follow a particular earlier decision, or whether there is scope to distinguish or depart from it. The answer depends on the court hierarchy, the closeness of the facts, and whether the decision in question is ratio or obiter.

Statutory Interpretation

Where legislation is ambiguous, courts must interpret it. The main approaches are:

• Literal rule: Apply the ordinary natural meaning of the words, even if the result appears unreasonable.
• Golden rule: Apply the literal meaning unless it would produce an absurd result, in which case a modified meaning may be adopted.
• Mischief rule (and purposive approach): Identify the mischief (gap or problem) the statute was designed to remedy and interpret the words to best remedy it. The purposive approach, now dominant in UK courts, asks what Parliament intended to achieve.

Section 3 of the Human Rights Act 1998 adds a further interpretive obligation: legislation must be read and given effect in a way that is compatible with Convention rights “so far as possible.”

Sources of Law

The principal sources of English law are legislation (primary and delegated), common law (judge-made law through precedent), and equity. European law, though no longer directly applicable, continues to influence domestic law through retained EU law.

• Primary legislation: Acts of Parliament. The supreme source — courts cannot strike down primary legislation.
• Delegated legislation: Statutory instruments, by-laws, Orders in Council. Subject to judicial review for ultra vires.
• Common law: Judge-made law through the doctrine of precedent. Fills gaps not addressed by legislation.

Practise This Topic on Sqewise

The legal system provides the framework within which all other SQE1 knowledge operates. Practise English legal system questions on Sqewise, review your performance on all FLK1 subjects on the progress dashboard, and see the complete SQE1 topic list.

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The SRA Standards and Regulations: An Overview

The SRA Standards and Regulations came into force in November 2019. They replaced the previous SRA Handbook and introduced a more outcomes-focused approach. The key documents are:

• The SRA Principles — seven overarching principles that apply to all individuals and firms regulated by the SRA
• The Code of Conduct for Solicitors, RELs and RFLs — individual professional obligations
• The Code of Conduct for Firms — firm-level obligations
• The SRA Accounts Rules — client money and financial obligations
• The SRA Authorisation of Individuals Regulations — qualification and authorisation requirements

The Seven SRA Principles

Every solicitor must act in a way that upholds all seven principles. Where two principles appear to conflict, the one that most effectively serves the overarching purpose of protecting the public interest will take precedence. The seven principles require solicitors to:

• Act in a way that upholds the constitutional principle of the rule of law and the proper administration of justice
• Act in a way that upholds public trust and confidence in the solicitors’ profession and in legal services provided by authorised persons
• Act with independence
• Act with honesty
• Act with integrity
• Act in a way that encourages equality, diversity, and inclusion
• Act in the best interests of each client

Conflicts and Priority

Principles 1 and 2 (rule of law and public trust) take priority over the duty to the client where they conflict. A solicitor must never allow their duty to the client to override their duty to the court or their obligations to the rule of law.

The duty to act in the best interests of the client (Principle 7) is subject to the overriding obligations to the court and to the rule of law. Questions testing this hierarchy are common — always consider whether any higher obligation limits the duty to the client before advising.

Confidentiality and Disclosure

The duty of confidentiality requires a solicitor not to disclose information relating to the client’s matter without the client’s consent — unless compelled by law, required to disclose to prevent a future crime, or in connection with self-defence proceedings.

The duty of disclosure requires a solicitor to share with the client any information material to their matter, subject to confidentiality obligations owed to others. These two duties can conflict — for example, where information from one client would assist another. In such cases the solicitor must usually decline to act for one or both clients.

Conflicts of Interest

A solicitor must not act where there is an own-interest conflict or a significant risk of conflict between two or more clients. A “own interest” conflict arises where the solicitor’s own interests conflict with those of the client. A client conflict arises where the interests of two clients conflict or there is a significant risk of conflict.

Exceptions permit acting for two clients in a conveyancing transaction under certain conditions (standard property transactions, no conflict, informed consent from both parties) — but the rules are strict and frequently tested.

Undertakings

An undertaking is a statement made by a solicitor to another party that the solicitor will do something or refrain from doing something. Undertakings are binding on the individual solicitor — they must be fulfilled even if the client refuses to honour the underlying obligation or goes insolvent. Breach of an undertaking is a serious professional matter.

Practise This Topic on Sqewise

Professional conduct questions appear throughout both FLK1 and FLK2. They test knowledge of specific rules and the ability to apply them to realistic scenarios. Practise legal services questions on Sqewise, review your mastery on the progress dashboard, and see all covered topics.

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The Conveyancing Process: An Overview

A standard residential freehold purchase proceeds in broadly the following sequence:

• Client instructions and funding confirmed; conflict check; money laundering verification
• Draft contract received from seller’s solicitor; pre-contract searches and enquiries raised
• Mortgage offer received; report to client
• Exchange of contracts — parties become legally bound; deposit paid (usually 10%)
• Post-exchange steps: land charges search, priority search at Land Registry (OS1)
• Completion — balance of purchase price transferred; keys released; seller’s solicitor redeems mortgage
• Post-completion: SDLT return and payment within 14 days; Land Registry application within priority period

Pre-Contract Searches

Before exchange, the buyer’s solicitor conducts searches to reveal matters affecting the property. Key searches include:

• Local authority search (LLC1 and Con 29): Reveals planning history, road adoption, enforcement notices, and statutory obligations affecting the land.
• Drainage search: Confirms whether the property is connected to public sewers and the location of drains.
• Environmental search: Identifies contaminated land, flood risk, and ground stability issues.
• Land Registry OS1 priority search: Conducted just before completion; protects the buyer’s application for 30 working days.

The OS1 priority search is one of the most tested procedural steps. Its 30-working-day priority period means the buyer’s solicitor must complete and submit the Land Registry application within that window — or lose the protection against later registrations.

Stamp Duty Land Tax (SDLT)

SDLT is payable on the purchase of land above certain threshold values. For residential property:

• Up to £250,000: 0% (standard rate)
• £250,001–£925,000: 5%
• £925,001–£1.5m: 10%
• Over £1.5m: 12%

First-time buyer relief applies for purchases up to £625,000. Higher rates apply for additional dwellings (3% surcharge). SDLT is calculated on the amount within each band (a slice system, not a slab system). The return must be submitted and tax paid within 14 days of completion.

Title Investigation

For registered land, the buyer’s solicitor obtains official copies of the register (title register and title plan) from the Land Registry. They must check:

• The proprietorship register — who owns the land and any restrictions on disposal
• The charges register — mortgages, covenants, and other encumbrances
• The property register — description of the property and appurtenant rights

Mortgages

Most residential purchases are financed by a mortgage. The solicitor often acts for both buyer and lender (subject to conflict checks). The lender will impose conditions in the mortgage offer, and the solicitor must report to the lender on any matters that might affect the security. On completion, the existing mortgage on the seller’s title must be redeemed and a Form DS1 (or electronic discharge) obtained.

Practise This Topic on Sqewise

Property practice questions in FLK2 often involve calculating SDLT, identifying the correct search, or advising on a problem that has arisen in a transaction. Practise property questions on Sqewise, use the study planner to allocate sufficient time to this topic, and explore our full mock exams.

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The Civil Procedure Rules: Overriding Objective

The CPR are governed by the overriding objective: to enable the court to deal with cases justly and at proportionate cost. This means ensuring parties are on an equal footing, saving expense, dealing with cases proportionately, ensuring cases are dealt with expeditiously and fairly, and allotting an appropriate share of court resources.

The overriding objective is not just background — it is used by courts to interpret and apply every rule in the CPR, and parties are under a duty to help the court further it.

Limitation Periods

Claims must be brought within the relevant limitation period, after which they are time-barred:

• Contract claims: 6 years from the date of breach (simple contract); 12 years (deeds)
• Tort claims: 6 years from the date the cause of action accrued (generally when damage occurred)
• Personal injury: 3 years from the date of injury, or date of knowledge if later
• Defamation: 1 year

For latent damage in negligence (other than personal injury), the limitation period is 6 years from accrual or 3 years from date of knowledge — whichever is later — subject to an overriding 15-year long-stop under the Limitation Act 1980.

Starting Proceedings

Proceedings are started by issuing a claim form in the appropriate court. The claim form must be served within 4 months of issue (2 months if served outside the jurisdiction). Particulars of claim must be served within 14 days of the claim form (or included with it).

Pre-action protocols are a critical area for exam questions. Most types of claim have a relevant protocol. The consequences of non-compliance — adverse costs orders, stays — are frequently tested. Always identify the applicable protocol before advising on commencing proceedings.

Track Allocation

Once a defence is filed, the court allocates the case to one of three tracks:

• Small claims track: Claims up to £10,000 (personal injury/housing: lower limits). Informal procedure; costs recovery very limited.
• Fast track: Claims between £10,001 and £25,000, suitable for trial within one day. Fixed costs apply in most cases.
• Multi-track: Claims over £25,000, or complex claims regardless of value. Full costs recovery available. Active case management by the court.

Interim Remedies

Before or during proceedings, a party may apply for interim remedies including:

• Interim injunctions: The American Cyanamid test — is there a serious question to be tried? Is the balance of convenience in favour of granting the injunction? Are damages an adequate remedy?
• Freezing orders (Mareva injunctions): Restrain a defendant from dissipating assets pending judgment. Require a good arguable case and a real risk of dissipation.
• Search orders (Anton Piller orders): Allow entry to premises to inspect or preserve evidence. Granted without notice only in exceptional circumstances.

Costs

The general rule is that costs follow the event — the losing party pays the winning party’s costs. However, the court has wide discretion. Part 36 offers are particularly important: a claimant who fails to beat a defendant’s Part 36 offer faces cost consequences from the expiry of the offer period.

Practise This Topic on Sqewise

Dispute resolution questions in FLK1 test procedural precision. Dates, thresholds, and track allocation figures are directly examinable. Practise dispute resolution questions on Sqewise, check your progress on the dashboard, and see all SQE1 topics covered.

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The Nature of the UK Constitution

The UK does not have a single codified constitutional document. Instead, the constitution is found in statutes, common law, and constitutional conventions. Key constitutional statutes include the Bill of Rights 1689, the Human Rights Act 1998, and the Constitutional Reform Act 2005.

Parliamentary Sovereignty

Dicey’s classic formulation: Parliament can make or unmake any law; no Parliament can bind its successor; no court can declare an Act of Parliament invalid. This remains the foundational principle, though it has been challenged in practice:

• The Human Rights Act 1998: Courts can make declarations of incompatibility but cannot strike down legislation.
• Constitutional statutes: In Thoburn v Sunderland City Council [2002], Laws LJ suggested constitutional statutes are not impliedly repealed by later inconsistent legislation — a controversial but influential idea.

The Rule of Law

The rule of law — associated with Dicey and Lord Bingham — requires certainty and accessibility of the law; equality before the law; and protection of fundamental rights. The Constitutional Reform Act 2005 placed the Lord Chancellor under a statutory duty to uphold the rule of law and the independence of the judiciary.

Questions about the tension between parliamentary sovereignty and the rule of law — or the extent to which the HRA 1998 creates a constitutional dialogue — are classic SQE1 conceptual questions. Know the arguments on both sides.

Judicial Review

Judicial review supervises the exercise of public powers. It is concerned with whether a decision was made lawfully, not its merits. The main grounds are:

• Illegality: The decision-maker acted ultra vires or made an error of law.
• Irrationality: The decision is so unreasonable that no reasonable decision-maker could have reached it (Wednesbury). Proportionality applies where Convention rights are engaged.
• Procedural impropriety: Failure to follow required procedures, or breach of natural justice — including apparent bias.

The Human Rights Act 1998

Section 3 requires courts to interpret legislation compatibly with Convention rights “so far as possible.” Section 4 empowers higher courts to make declarations of incompatibility. Section 6 makes it unlawful for public authorities to act incompatibly with Convention rights.

Practise This Topic on Sqewise

Constitutional law questions in FLK1 combine conceptual principles with application to specific scenarios. Practise public law questions on Sqewise, review your progress on the dashboard, and see the full SQE1 topic list.

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Why the Three Certainties Matter

An express trust cannot exist unless three certainties are present: certainty of intention, certainty of subject matter, and certainty of objects. If any one certainty fails, no valid trust is created.

Certainty of Intention

The settlor must have shown an intention to impose on a trustee a legal obligation to hold property for the benefit of a beneficiary. No particular words are required — the court looks at substance. Merely “hoping” or “wishing” that property will be used in a certain way (precatory words) does not impose a binding obligation.

• Lambe v Eames (1871): “in any way she thinks best for the benefit of herself and her family” — no trust; precatory.
• Paul v Constance [1977]: repeated statements that money was “as much yours as mine” — sufficient intention to create trust.

Certainty of Subject Matter

The trust property must be identifiable with certainty. Two sub-issues arise:

• Tangible property: Must be segregated or separately identifiable. A trust of “50 of my 500 bottles of wine” fails if the bottles are physically indistinguishable and no segregation has occurred (Re London Wine).
• Intangible property: The rule is less strict. In Hunter v Moss [1994], a trust of 50 out of 950 identical shares was held valid because the shares were fungible. This is a controversial decision but remains good law.

The distinction between tangible and intangible property in certainty of subject matter is a classic SQE1 trap. Apply Re London Wine to physical goods and Hunter v Moss to shares and similar fungible intangibles.

Certainty of Objects

There must be certainty about who the beneficiaries are. The test differs by trust type:

• Fixed trusts: The “complete list” test — it must be possible to list all beneficiaries.
• Discretionary trusts: The “is or is not” test (McPhail v Doulton [1971]) — can it be said with certainty that any given person is or is not a member of the class?
• Powers of appointment: Also the “is or is not” test, but administrative unworkability (a class so wide as to make administration impossible) can invalidate the power.

Consequences of Failure

If a certainty fails after property has been transferred, the trustee holds on resulting trust for the settlor or the settlor’s estate. If no transfer has occurred, the property remains with the settlor.

Practise This Topic on Sqewise

Trusts questions in FLK2 often involve applying all three certainties to a short set of facts — spotting which certainty is at issue and identifying the correct test. Practise trusts questions on Sqewise to build speed and accuracy, and see the full SQE1 topic breakdown.

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Requirements for a Valid Will

A will is only valid if it satisfies the formal requirements in the Wills Act 1837, as amended:

• The will must be in writing;
• It must be signed by the testator (or by someone in their presence and by their direction);
• The testator must intend by their signature to give effect to the will;
• The signature must be made or acknowledged in the presence of two witnesses, both present at the same time;
• Each witness must sign (or acknowledge their earlier signature) in the testator’s presence.

A beneficiary who witnesses the will does not invalidate the will, but the witness-beneficiary’s gift fails.

Testamentary Capacity

The test from Banks v Goodfellow (1870) requires the testator to understand the nature of making a will and its effects; understand the extent of the property being disposed of; comprehend the claims of those who might expect to benefit; and not be suffering from a disorder of the mind that perverts their judgment.

Intestacy Rules

When a person dies without a valid will, the Administration of Estates Act 1925 (as amended) applies:

• Spouse/civil partner and no children: spouse takes the entire estate.
• Spouse/civil partner and children: spouse takes all personal chattels, a statutory legacy (currently £322,000), and one half of the residuary estate. Children share the other half equally (held on statutory trust until 18 or marriage).
• No surviving spouse: estate passes to children, then grandchildren, then parents, then siblings — in strict statutory order.

Know the current statutory legacy figure (£322,000). It has changed over time and examiners may test whether you know the current amount.

Personal Representatives

An executor (named in the will) or administrator (appointed by the court where there is no will) must collect assets, pay debts, obtain a grant of representation, and distribute the estate. The key procedural step is the grant of probate (for executors) or letters of administration (for administrators) from the Probate Registry.

Family Provision Claims

Under the Inheritance (Provision for Family and Dependants) Act 1975, certain categories of person — spouses, former spouses, children, cohabitees of two or more years, and dependants — can apply to the court for reasonable financial provision from the estate where the will or intestacy rules fail to make it. The standard for a surviving spouse is higher than for other applicants.

Practise This Topic on Sqewise

Wills and intestacy questions reward candidates who know the rules precisely. The statutory legacy figure, intestacy order, and formal will requirements are all directly examinable. Practise this topic on Sqewise to build precision, and track your mastery on the dashboard. See all FLK2 topics covered.

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The Statutory Framework: Companies Act 2006, ss. 171–177

The Companies Act 2006 codified directors’ duties for the first time in English law. There are seven duties, owed by every director to the company itself — not to shareholders individually, not to creditors, except in modified form when insolvency is threatened.

The Seven Duties in Detail

• s.171 — Act within powers: Act in accordance with the company’s constitution and only exercise powers for the purposes for which they were conferred.
• s.172 — Promote the success of the company: Act in the way the director considers, in good faith, would most likely promote the success of the company for the benefit of its members as a whole. Must have regard to long-term consequences, employees, relationships, community, environment, reputation, and fairness between members. Shifts towards creditors when insolvency threatens.
• s.173 — Exercise independent judgment: Must not fetter their discretion or agree in advance to vote in a particular way.
• s.174 — Exercise reasonable care, skill and diligence: Dual standard — the general knowledge and skill of a person carrying out the director’s functions, plus the director’s own actual knowledge and skill if higher.
• s.175 — Avoid conflicts of interest: Avoid situations where the director has an interest that conflicts with the company’s interests. Authorisable by the board (non-interested directors forming a quorum).
• s.176 — Not accept benefits from third parties: Do not accept benefits conferred by reason of being a director. No board authorisation exception (unlike s.175).
• s.177 — Declare interest in proposed transaction: Before the company enters a transaction in which the director has an interest, declare the nature and extent of that interest to the other directors.

A common exam question presents a director taking a business opportunity that belongs to the company. This engages s.175 (conflicts) and possibly s.172 (acting in the company’s best interests). Work through each duty — they can overlap, and multiple duties may be breached simultaneously.

Consequences of Breach and Derivative Actions

The company may seek to enforce duties against a director through a derivative action — a claim brought by a shareholder on the company’s behalf under Part 11 CA 2006. The court must give permission for the action to continue and will consider whether a hypothetical independent board would authorise it. Shareholders may ratify a breach by ordinary or special resolution depending on the nature of the duty.

Shadow Directors and De Facto Directors

A shadow director is a person in accordance with whose instructions the directors are accustomed to act. A de facto director acts as a director without having been formally appointed. Both are subject to the majority of CA 2006 duties.

Disqualification

Under the Company Directors Disqualification Act 1986, a director may be disqualified for 2–15 years on grounds of unfitness, persistent filing breaches, or fraud.

Practise This Topic on Sqewise

Directors’ duties questions in FLK1 often involve complex multi-party scenarios. Build your confidence through targeted practice questions on Sqewise, and use the study planner to ensure business law gets the coverage it deserves alongside contract and tort. See the full SQE1 topic list for everything covered.

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The SRA Accounts Rules: The Core Principle

The overarching principle is simple: client money must be kept separate from the firm’s money. The SRA Accounts Rules exist to protect clients and third parties whose money law firms hold in the course of practice.

What Is Client Money?

Client money is money that a solicitor holds or receives for or on behalf of a client or third party in connection with the firm’s legal services. It includes money received as a deposit in a conveyancing transaction, money held pending completion, money received to pay a court fee, and damages received on a client’s behalf.

It does not include money received as payment for the firm’s own fees (except where held in anticipation of billing), or money that belongs to the firm.

A firm’s own fees and disbursements that have already been billed should be transferred from the client account to the office account promptly. Allowing billed fees to sit in the client account is a breach of the Rules.

The Client Account

Client money must be held in a client account — a separate bank account maintained at an authorised bank, clearly designated as a client account. The firm must not mix client money with its own funds (office money). This separation is the cornerstone of the Rules.

Key operational rules:

• Client money received must be paid into the client account promptly — usually on the same day or the next working day.
• Money should only be withdrawn from client account to pay the client, to pay a third party on the client’s behalf, or to transfer to office account once fees have been properly incurred.
• You must not withdraw money from client account to pay your own fees unless a bill has been delivered or the client has specifically authorised it.

Interest on Client Money

A firm must account to the client for a fair sum of interest earned on client money unless the amount is too small to be worth accounting for, or the client has agreed otherwise. The Rules do not prescribe a fixed rate — the obligation is to pay a “fair sum.”

• Interest should normally be calculated from when client money is received to when it is paid out.
• Client money held on a designated deposit account earns interest for that client directly.

Common SQE1 Exam Scenarios

Exam questions on solicitors’ accounts typically ask whether a specific transaction has been handled correctly. Common scenarios include:

• A solicitor receives a cheque payable to the client — should it go to client account?
• A firm uses client money to pay its own office expenses — is this a breach?
• A client leaves funds on account for months after a matter closes — what obligation does the firm have?

Accountants’ Reports and Compliance

Firms must maintain proper accounting records and reconcile client account balances monthly. An annual accountant’s report must be submitted to the SRA if the firm holds client money above a de minimis threshold, unless the firm opts into the SRA’s alternative regime.

Practise This Topic on Sqewise

Solicitors’ accounts is a topic where precision matters — small misunderstandings translate directly into lost marks. Practise SQE1 accounts questions on Sqewise and track where you need more work on the progress dashboard. For full syllabus coverage, see our SQE1 topics page.

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