The Chancellor used this week 's Budget to announce the first above-inflation increase in the threshold for the higher rate of tax . George Osborne is expected to pledge to accelerate increases in the 40p income tax threshold if the Conservatives win the general election . The Chancellor used this week 's Budget to announce the first above-inflation increase in the threshold for the higher rate of tax , which has sucked in ever-more middle-class families , in seven years . But yesterday economists said that even after the latest rise , the decision to limit increases had left millions out of pocket . The Institute for Fiscal Studies ( IFS ) said higher-rate taxpayers will be £535 worse off in 2017-18 than they would have been had the threshold risen in line with inflation since 2010 . Those earning up to £100,000 have benefited from repeated increases in the 20p threshold , but not as much as the 26million basic-rate taxpayers . Mr Osborne persuaded reluctant Liberal Democrat colleagues to agree that the higher-rate tax threshold should rise gradually from £41,865 this year to £43,300 in April 2017 as he sought to woo voters ahead of May 's election . He is now expected to use the Conservative election campaign to say he would go faster if the party wins outright . The Chancellor says he wants to deliver a threshold of £50,000 for higher-rate tax and £12,500 for the basic rate . The IFS said yesterday that higher-rate taxpayers were feeling the pain from the Coalition 's earlier decisions to cut the threshold for paying 40p and then increasing it by less than inflation . The think-tank said the threshold would need to rise to £48,650 by 2017 to ensure that higher-rate taxpayers had not lost out since 2010 . Robert Joyce , a senior research economist at the IFS , said : 'Higher-rate taxpayers will be £535 worse off because the point at which you start paying 40p income tax has been reduced in real terms significantly over this Parliament . ' But he said basic-rate taxpayers will be £597 a year better off by 2017-18 because of increases in the personal allowance – the point at which income tax of 20 per cent kicks in . Mr Osborne says he wants to deliver a threshold of £50,000 for higher-rate tax and £12,500 for the basic rate . The Coalition has already raised the personal allowance from about £6,500 to £10,000 and it is due to hit £11,000 in 2017 . Mr Osborne said the planned increases in the 40p threshold in the coming years – which could be reversed by an incoming Labour government – were a modest 'downpayment ' on Tory plans to raise the threshold to £50,000 by 2020 . David Cameron vowed last year to end the scandal of so-called 'fiscal drag ' , which has seen millions of people dragged into higher rates of income tax by below-inflation increases to thresholds . The number of people paying 40p tax has risen from around three million to five million since 2010 and is due to keep rising . The IFS , the leading independent expert on tax and spending issues in Britain , has estimated that one in four taxpayers could be hit over the coming decade . But it has warned that such a large increase in the threshold 'might be politically difficult for a government to go ahead with ' given the likely backlash among voters . The Tories have so far refused to say exactly where the money will come from to fund an increase in the 40p threshold to £50,000 by 2020 . The policy has been opposed by Labour and the Lib Dems . Critics called on all political parties to raise the threshold at which the 40p tax rate kicks in . One leading tax adviser said the 40p rate of income tax 'was not intended to be a tax on people who you would hardly say are earning a fortune ' .
Chancellor voted in Budget first above - average tax rise in 40p ##x . opponents said efforts to make increases had left millions out of pocket . Mr Osborne urged reluctant Lib Dems to agreed to higher - rate threshold . Expected to use Tory campaign to say taxes go faster if they vote outright .