Hargreaves Lansdown Launches Workaround for Cash ISA Cap

Britain's largest broker, Hargreaves Lansdown, has introduced a low-cost workaround designed to help savers bypass upcoming government cuts to the cash Individual Savings Account allowance. The new offering provides individuals with a way to earn cash-like returns within a stocks and shares ISA rather than a traditional cash ISA, helping them avoid new tax penalties.

Beginning in April, planned changes to savings rules will reduce the annual cash ISA allowance for individuals under 65 from £20,000 to £12,000. To ensure compliance with these adjustments, the Treasury established a prohibition against holding 100 percent of a stocks and shares ISA in money market funds, which are often referred to as cash-like investments.

Despite government efforts to enforce the allowance cap, financial analysts noted that holding merely one penny in any product outside of a money market fund effectively circumvents the restriction. This loophole has allowed the broker to market its product as a direct alternative for risk-averse savers.

Alex Lambert, representing Hargreaves Lansdown, explained the motivation behind the new offering. "Thinking about those clients who are using their £12,000 limit and then are still scared to invest and would use this as a workaround, we've invested quite heavily into our overall cash management range," Lambert stated.

Money market funds invest in a variety of instruments, including short-term cash deposits and government or bank debt. These financial products are structured to supply low-risk returns that mirror cash savings, giving savers an accessible place to park their money without taking on the volatility associated with standard equity shares.

Demand for these low-risk funds has surged in recent years as interest rates climbed above 5 percent starting in 2022. According to brokerage data, client participation has multiplied significantly over a five-year period, with demand increasing by 35 percent over the past year alone and nearly £7 billion invested in 2025.

Anna Macdonald, investment strategy director at Hargreaves Lansdown, highlighted the economic climate driving the trend. "There was a sense that inflation is here, and money market funds are a low-risk place to hold cash in investment accounts. It made a lot of sense," Macdonald said, adding that client interest has grown substantially in anticipation of the April regulatory changes.

The new financial product features an ongoing charge of 0.06 percent, amounting to 60 pence per £1,000 invested, alongside the broker's 0.35 percent platform fee and a £1.95 dealing charge. This structure runs contrary to the stated policy goals of former Chancellor Rachel Reeves, whose adjustments were originally intended to steer more savers away from cash and toward traditional equity investments.