Huge changes ahead for Scottish Legal minds

Over the next 12 months legal firms will be helping the public grapple with new changes to Inheritance Tax, something they warn could more than double the time it takes to resolve a person’s estate.

And within the industry they will be looking at regulatory changes that could mean greater transparency and greater investment from outside Scotland.

Law Society of Scotland CEO Ben Kemp said the coming year would see them focussed on an agenda for change and modernisation within the industry, as they look to lead the way on the technological and regulatory change, and redefine the way they serve their 14,000 members.

The technological will involve both modernising their own systems to ensure they can deliver tailored services to clients, but also looking at how they can support firms in adopting new technologies.

Regulatory reform is likely to be their biggest challenge of the year ahead. Following the Regulation of Legal Services (Scotland) Act in 2025 the Law Society is challenged with shifting to regulating firms instead of individuals.

And part of that change will be tied into the expected introduction of Alternative Business Structures (ABS) allowing non-solicitor ownership of legal firms in the future.

“This is the opportunity for firms in Scotland to attract equity investment in a way that they haven’t been able to so far, and some firms are very keen as it will enable equity investment and could give them more flexibility,” Ben said.

“If you become an ABS you won’t need to be exclusively owned by Scottish solicitors, you could have others with a stake - including non-lawyers. There are concerns around what that could mean, whether it could lead to conflicts of interest, and so we will be doing a lot of work on that as we implement the changes required by the Act.”

And Ben also said they needed to keep looking to the future.

“We will be engaging with the way in which we train and develop our lawyers of the future and the skills they will need in a world of technology and change,” he said.

“That’s a conversation we will be developing and building on, and that’s really important to the future shape of the profession.”

Andrew Paterson, partner and chairman at Murray Beith Murray, said AI and regulation around Alternative Business Structures (ABS) which would bring Scottish legal firms in line with England in their ability to attract alternative investment would be among the biggest changes over the coming year.

“AI is already such a significant part of the profession but we’ll know a lot more about its impact in the next year as people get more experienced in using it and we have more settled patterns about how it will be deployed in firms,” he said.

“Private equity coming into legal firms will be another big area of change. England has a different regulatory framework and they have been able to attract private investment for a while now. We are not seeing private equity flooding into English law firms yet, but it is coming.

“The question for us as a profession is does that trickle become a flood as it has done with other regulated professions like dentistry or accountancy.

“Some within the industry are very vocal in pushing for that change to happen sooner, but it will have a major impact so it needs to be done properly if it’s going to be done at all. It’s for the prediction of the public and the reputation of the industry and we can’t jeopardise that.”

He also said one of the biggest issues for the public, and something likely to drive a significant amount of legal work, will be the inclusion of private pensions in a person’s estate when inheritance tax is calculated.

That change is due to come in from April next year, and while Andrew does not expect it to affect a huge percentage of the Scottish population, the uncertainty would mean people would be right to seek legal advice.

“There has been far less publicity about this change than there was around the inheritance tax changes around the threshold, even though this will affect far more people,” he said. “A significant number of people will now have a private pension, and so for clients and lawyers this change will make the process far more complicated, and unfortunately that could mean it will take far longer.

“It is already slow - a straightforward estate can take nine months to complete. If there’s inheritance tax to pay, it used to be closer to 18 months, and that could now be even longer because of this change, as the extra procedural steps will significantly increase the complexity and the timescale.”

Allan Wernham, Managing Director of CMS Scotland, said he was “cautiously optimistic” about the year ahead.

“With markets having operated against a backdrop of economic and geopolitical uncertainty for some time, we are seeing evidence that businesses are adapting to these conditions, he said.

“There are signs of increasing confidence around investing, although greater global stability would certainly help businesses make key decisions. Energy and infrastructure should remain major drivers for the Scottish legal sector in the year ahead. There are significant opportunities to further develop Scotland’s renewable energy sector, build grid infrastructure capacity and progress the wider energy transition.”

He also agreed that the increasing integration of Artificial Intelligence (AI) into the work of law firms would continue to be a major challenge for the industry.

“Technology, including AI, will continue to play an increasingly important role within our sector, both in terms of the clients we support and the impact this has on how lawyers Work,” he said.

“The question is shifting away from whether lawyers use AI to how they use it in responsible manner to ensure it helps deliver better and more efficient outcomes for clients.

“As the use of AI develops, this will create a sharper focus on the importance of the value that the human element brings to clients. Lawyers must, more than ever, demonstrate an understanding of their clients’ sectors, their commercial pressures and the wider business environment.

“While technology can support some of our work, the building of long-term client relationships will remain the essential ingredient enabling lawyers to add genuine value.”

And he believes that regulatory change should help people to have confidence in the Scottish legal system in the future which in turn will help the country be an attractive place to do business.

“The Regulation of Legal Services (Scotland) Act 2025 will also begin to reshape the regulatory environment,” he said. “Its focus on transparency, consumer protection and the regulation of legal businesses should reinforce confidence in the profession. The challenge will be proportionate implementation that protects professional independence while enabling firms to innovate and compete effectively.

“The legal profession plays a key role in making Scotland an attractive and straightforward place to invest and do business. In this climate of political change and economic uncertainty, this is more important than ever.

“The challenge for both the legal sector, and for Scotland more broadly, is to convert the opportunities we have in areas such as energy, infrastructure, technology and financial services into investment and economic growth in the year ahead.”