What conveyancers lose
Conveyancing client accounts hold substantial sums during the window between exchange and completion, and even brief holds generate material interest when base rates sit above 4%. Some practices rebate interest to clients as a retention tool. Others retain it as ancillary revenue that subsidises fixed conveyancing fees in a commoditised market. The ILCA scheme would take a proportion of that interest before firms apply existing rules on client entitlement.
The MoJ's August job advertisement describes the scheme as delivering "sustainable funding" for justice services, but sustainability depends on interest rates, transaction volumes and the sums held in client accounts at any given time. All three variables fluctuate. The government has not published how much revenue the scheme would generate, what proportion of interest it would take, or what firms would be permitted to retain.
The Law Society told the MoJ in its consultation response that the scheme is "fundamentally flawed, lacks adequate evidence and is a crude sector-specific tax on clients of legal services". The consultation closed in March 2026. Results have not been published. The appointment of a head of policy to progress design, legislation and implementation suggests the MoJ has reached its conclusion.
Legislative path and regulatory distortion
ILCA would require primary legislation and amendments to the SRA Accounts Rules. The job advertisement's emphasis on legislation and implementation indicates drafting is underway. If the scheme is included in a forthcoming Justice Bill, parliamentary scrutiny will clarify scope, rates and whether licensed conveyancers regulated by the Council for Licensed Conveyancers fall within scope alongside SRA-regulated solicitors.
Regulatory inconsistency would create competitive distortion. If CLC-regulated conveyancers face a lower levy or delayed implementation, instructing clients and referral partners may shift volume. If the scheme applies only to solicitors' client accounts, non-lawyer conveyancing models gain a structural cost advantage.
The precedent is the larger concern. Letting agents in England hold client money under Client Money Protection scheme rules. Estate agents holding deposits operate similar structures under separate regulatory frameworks administered by RICS, Propertymark and other approved bodies. If government can hypothecate interest on solicitors' client accounts to fund legal aid, the logic extends to using interest on tenancy deposits or rental income to fund housing court backlogs, tribunal expansion or local authority enforcement.
Who pays
Conveyancers unable to absorb lost interest revenue will pass costs forward through higher transaction fees. Portfolio landlords and investors acquiring or disposing of property would fund legal aid indirectly through increased conveyancing bills. In a market where SDLT, EPC upgrade costs and the impending abolition of Section 21 already compress acquisition returns, additional friction costs matter.
The Law Society argues ILCA "sets a damaging precedent and conflicts with wider government commitments on growth" by making the MoJ "a tax-raising department funded through clients of legal services". The statement describes the scheme as "a raid on clients' money to generate an unreliable source of revenue for the justice system".
No other regulated profession holding client money currently faces an equivalent levy. The absence of precedent is both the scheme's novelty and its risk. If implemented, ILCA creates a funding model that other departments and regulators will examine when Treasury spending reviews tighten.