Finance experts have warned parents and workers of "brutal flaws" in the tax system that could see them lose out on thousands of pounds in benefits and tax breaks.
In the worst-case scenario, an individual could lose out on a whopping £14,000 if they were handed a pay rise of just £1 per year.
Analysis from stockbroker and investment platform AJ Bell revealed that a parent could lose thousands of pounds in childcare benefits if their salary went just over £100,000 a year.
According to the finance expert's research, a parent with three young children who earns just under £100,000 a year could be better off turning down a small pay rise.
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This is because when a parent earns over £100,000 they lose their entitlement to £2,000 of tax-free childcare per child — totalling a massive £6,000 for a parent with three children.
As well as this, their entitlement to 30 hours of free term time childcare from the government would also be reduced to 15 hours.
AJ Bell estimated this would cost £7,952 to cover - according to the Coram Childcare reports data for hourly childcare rates in outer London.
This means that on childcare benefits alone the parent would lose out on £13,952.
Head of personal finance at AJ Bell, Laura Suter, told The Telegraph : "The tragic thing is that many parents won’t be aware that they have fallen foul of the rules until the taxman comes knocking, landing them with a tax bill for thousands."
But it's not just parents that could lose out by taking a small pay rise.
All workers who earn between £100,000 and £125,140 would see their £12,570 tax-free personal allowance decrease at a rate of £1 for every £2, AJ Bell said.
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This would mean that if an individual on just under £100,000 took a £1,000 pay rise they would lose £400 of this to income tax but would also lose £500 from their personal allowance at a tax rate of 40 per cent.
As a result, the worker would lose £600 of the pay rise and could also see their National Insurance payments go up by two per cent.
Ms Suter said that their research had exposed 'brutal flaws' and 'ridiculous complexities' in the UK tax system.
The £100,000 threshold for tax-free childcare applies to each parent individually, so if two parents earn £99,999 each they would be entitled to the £2,000 in free childcare per child.
However, a family where one parent earns £100,001 but the other earns nothing would not be entitled to the free childcare.
Ms Suter advised parents and workers who could lose out by taking a pay rise to consider upping their pension contributions as a way to avoid going over the £100,000 threshold so they don't lose their entitlement to tax-free childcare or the free childcare hours.
She added: "People who are self-employed through their own business may want to consider whether they pay themselves a lower salary so they stay under the threshold, if that’s financially practical.”