Chancellor George Osborne will drag more people into paying the 40p rate of tax to raise an extra £1bn in revenue.
In his March Budget, it was announced that the 40p tax threshold would be lowered from £42,475 to £41,450 to ensure the planned personal allowance rise would not benefit higher-rate taxpayers.
Once this cut is made next year, Osborne says there will be a 1 per cent rise in the higher-rate threshold in 2014/15, to £41,865, and in 2015/16 to £42,285.
The 1 per cent rise is below the current level of inflation and wage rises, meaning it will raise money for the Government as more workers earn salaries over the threshold.
Osborne said: “It is the first cash increase under this Government but I want to be straight with people and say this raises £1bn in revenue from 2015/16.”
Osborne also announced that the personal allowance will rise from £8,105 to £9,440 next April, £235 higher than the Government originally planned. Unlike previous increases to the personal allowance the additional increase will benefit higher-rate taxpayers as well as basic rate taxpayers.