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Martin Lewis Highlights HMRC 'Tax Hole' Where Earning More Means You Take Home Less
The UK tax glitch reduces personal savings allowance from £1,000 to £500 above £50,270 income, causing some interest to be taxed at 40%, affecting few taxpayers in 2025/26.
- On October 13, 2025, Martin Lewis, Money Saving Expert, warned about an HMRC 'tax hole' affecting savers ahead of the 2025/26 tax year.
- Because the higher-rate threshold triggers the personal savings allowance to drop from £1,000 to £500 for higher-rate taxpayers in the 2025/26 tax year, Lewis warned of a tax 'hole'.
- A saver on £50,270 pays £200 tax on £1,000 interest, leaving £800; earning £950 interest results in £950 take-home, £150 more, as Lewis explained.
- Taxpayers near the higher-rate threshold face a niche situation that can cost or save hundreds of pounds, and small fixes like Gift Aid donations or pension contributions can keep interest tax-free.
- Lewis described the rule as `quirky` and warned it can leave savers better off earning less interest, summing it up: `Earn more interest, take home less.
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