The Institute of Fiscal Studies director Paul Johnson is predicting at least half of all basic rate taxpayers will pay 40p income tax over the next 15 years as millions more drift into the higher rate band.
Speaking at a fringe event on taxation at the Labour party conference in Brighton yesterday, Johnson also predicted big changes in the way pensioners are taxed national insurance in the next decade.
The influential thinktank says Government is reluctant to embark on radical tax simplification because of fears major changes would reduce the amount of tax collected.
The income tax personal allowance will rise to £10,000 next April and the Liberal Democrats want it to increase to £12,500 over the next parliament.
Responding to a question on what he expects to be the big tax changes by 2030, Johnson said: “We may have a basic rate of tax of 40p because we have been moving in that direction for the last 20 years because the personal allowance is going up and the level people pay 40p is going down so the 20p basic rate is being squeezed.
“We will either have a basic rate of 40p or we will have as many people paying the 40p rate as 20p, it’s gone up from 1 million 10 years ago to 4 million today. That is one very big change which is happening unnoticed and it is likely to carry on.
“I think there will also be a change in the way pensioners are taxed, particularly for national insurance contributions.”
Johnson also predicting huge reductions in the tax take from petrol as the UK seeks to meet green targets and believes it could pave the way for a national congestion charge by 2030.
Shadow exchequer secretary Catherine McKinnell predicted greater transparency in the tax system over the next decade as it seeks to keep pace with technological change.