How much does it cost to start a law firm in the UK?

Regulatory fees (2026/27)

The firm Compensation Fund contribution is easy to miss, and it is one reason some new firms start without a client account (see below).

Professional indemnity insurance

PII is usually the largest single start-up cost, and the hardest to predict before you have a quote. You must carry at least £2 million of cover per claim as a sole practitioner or partnership, or £3 million as a company or LLP, from a participating insurer on the SRA’s minimum terms.

Brokers’ published guidance puts premiums at roughly 2–5% of turnover, with start-ups towards the lower end but subject to insurers’ minimum premiums, often quoted in the low thousands of pounds for a low-risk new firm. Conveyancing, wills and probate, and litigation are priced higher. Treat these as indicative; your quote depends on your experience, your claims history and your work split.

Budget, too, for the six years of run-off cover you must buy if the firm ever closes.

Client money: accounts, reports and the alternative

Holding client money brings costs beyond the bank account:

• The £2,170 firm Compensation Fund contribution
• An annual accountant’s report, unless your average client balance is £10,000 or less and your maximum is £250,000 or less in the period
• Legal accounting software and the time to reconcile at least every five weeks

A third-party managed account (TPMA) avoids most of this by having a regulated payment provider hold client funds. The provider charges per transaction, but for a new firm that can be far cheaper than running a full client account.

Systems and running costs

• Practice and case management, and legal accounting. Usually priced per user per month. Check what is included: accounts, document management and time recording are often extras.
• Identity, AML and source-of-funds checks. Paid per check, and a real cost for property work.
• Legal research. A know-how and precedents subscription can be one of the larger annual costs for a sole practitioner.
• Cyber insurance and Cyber Essentials. Increasingly expected by insurers and lenders.
• Website and marketing. Including the SRA digital badge and published prices if you offer services covered by the Transparency Rules.
• Optional help with authorisation. Compliance consultancies charge for preparing applications and policies; it is optional but common.

The cost people underestimate: cash to get going

Insurance, the practising certificate and most set-up costs are paid before your first invoice. Transactional work is often billed only on completion, so the first fees may arrive months after you start. A cash buffer covering several months of costs and your own drawings is what decides whether a new firm survives its first year.

Ways to spend less in year one

• Start as a freelance solicitor if your work allows it: no firm authorisation, no client account, no firm Compensation Fund contribution. You need three years’ practice for reserved work and can’t hold client money.
• Use a TPMA instead of a client account.
• Start with lower-risk work and add higher-risk areas once you have a claims-free year to show insurers.
• Stay remote until the work justifies premises.
• Choose one platform for case management and accounts rather than several separate tools.

For the steps themselves, in order, see how to start a law firm in England and Wales.