Experienced professionals are quitting their jobs at the height of their careers over a “bizarre” quirk in the tax system that means hundreds of thousands are hit with an effective tax rate of more than 60pc.

The psychological effect of keeping just 38p from every £1 earned is leading to people turning down pay rises or quitting the workforce entirely, even where they are materially better off.

Influential think-tank the Institute for Fiscal Studies said workers were seeing high tax rates as the “final straw”.

It said the result was a dis-incentivised workforce and a direct drain on the economy that was going largely unnoticed – costing the state more than the billions in revenue the rate spike in the tax rate generates.

The quirk is caused by the gradual removal of the £12,500 tax-free personal allowance by £1 for every £2 earned over £100,000 a year. Once National Insurance contributions are factored in, the effective rate can be as high as 62pc, generating an additional £4bn for the Treasury.

Those earning between £125,000 and £150,000 still pay income tax at 40pc rate, but have no personal allowance. Top-rate, 45pc, tax is due on earnings over £150,000.