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Money expert Martin Lewis has issued a warning to his followers about a 'quirky glitch' of the Income Tax system whereby you can actually take home more money if you earn less. While generally, the income tax system is built on the idea that earning more always gives you more money, even if you move into a higher tax bracket, there is one 'niche' exception to this which happens right on the edge of the 40% threshold and is triggered if you have £1,000 in savings interest and a very specific amount of income.

Taking to X, Martin set out how some people would take home more money if they earned less savings interest, because they would avoid being pushed into the higher tax bracket.

Martin warned: "It's quirky and it's geeky but there is a hole in the tax system which actually means at one point you are better off earning less interest on your savings rather than more. You will literally have more money in your pocket if you earn less interest."

Martin went on: "Somebody asked me about it the other day. And I thought I would explain it to you.

"It all starts because the rate at which you pay higher rate tax is £50,270. For each £1 you earn after that the tax increases from 20% to 40% so you only take home 60p.

"But at the same time, your Personal Savings Allowance, the amount you can earn from savings outside of an ISA each year, drops from £1,000 a year tax free to £500 a year of interest tax free.

"And that is what causes this hole."

Martin then gave an example of someone who earned £49,300 from work and gained £1,000 savings interest, for a total of £50,300 income. You are a higher rate taxpayer, so only £500 of your savings is tax free. You pay 40% on the rest, so your net interest would be £800, losing £200 of the savings interest.

But another person who earned the same, £49,300, but earned £950 interest from savings instead of £1,000, would have £50,250 total income, just under the 40% threshold. That means none of your savings are taxed and your net interest is still £950. That means you're £150 better off even though you earned £50 less interest.

Martin added: "It's totally bonkers, it should not work like that, but it does work like that. And it is one of the very few points in the Income Tax system where if you earn more, you take home less.

"There are lots of annoying things in the Income Tax system, certainly where people earn over £100,000 and their marginal tax rate gets higher, but still there, earn more, take home more. With this one, earn more interest, and it's very niche, it won't affect many people but it's fascinating, earn more interest, take home less."