The Liberal Democrats will continue to cut taxes for people on lower and middle incomes, Nick Clegg has insisted as he dismissed suggestions that people in the 40p tax band were paying more tax.

The deputy prime minister said critics were "simply and plainly wrong" to say that the Lib Dem manifesto pledge – to raise the personal tax allowance to £10,000 – had led to an increase in taxes for those paying the higher tax rate of 40%.

Clegg spoke out as Tory MPs complained that the changes to the personal allowance, which George Osborne is expected to increase in Wednesday's budget to at least £10,500 from next April, have been made at the cost of people in the 40p tax band who earn more than £40,000.

Tory MPs are angry that the raising of the personal allowance has been balanced by slowing the annual rise in the threshold at which the 40p tax rate kicks in – guaranteeing that more people pay the higher rate in a process know as "fiscal drag". The Institute for Fiscal Studies has estimated that an extra 1.1m people will be brought into the 40p tax bracket.

Clegg said it was wrong to say that people in the 40p tax bracket were paying more tax.

"There has been a huge misconception about the number of people paying the 40% tax rate," he told the Today programme on BBC Radio 4. "Let me say it as plainly as I can. If you are in the 40% tax rate but earning less than around £100,000 – that does cover a number of people and there are more people now paying that tax rate – you are still better off than you were at the time of the last election because you don't pay any income tax on the first £10,000 you earn as of next month.

"Are they paying a penny more of income tax? No they are not. Are they actually paying less income tax? Yes they are. In fact, on average, someone paying the 40% income tax rate is about £300 better off compared to May 2010 because we have raised the point at which you start paying income tax. Finally, next month we are reaching my long-cherished goal that no one pays any income tax on the first £10,000 you earn. That helps everybody earning up to about £100,000."

The chancellor is expected to make clear in the Tory manifesto for next year's general election that the party will try to ease the pressure on people in the 40p tax band, possibly by pledging a cut in national insurance contributions. But Clegg said his priority would be to raise the personal tax allowance above £12,000.

"I am adamant that what we should continue to do is focus what resources we have at providing tax relief, lowering taxes for people on middle and low incomes," the deputy prime minister said.

"That is why I am so delighted that our plan of raising the point at which you start paying income tax finally to £10,000 next month has leapt straight from the front page of my party's manifesto into the pay packets of over 24 million taxpayers in this country, including those in the 40p tax rate."

The leaderships of the two coalition parties are united in dismissing criticism that people in the 40p tax band are paying more tax as a result of the higher personal allowance. But the Tory leadership know that their argument is only correct in a technical sense because it takes no account of the impact of inflation.

Critics say it is correct to say that somebody who has just entered the 40p tax bracket pays less than somebody who entered the tax band in 2010. But the new entrant this year would have been paying the lower 20% rate of tax in 2010 and would still be paying that rate had "fiscal drag" not kicked in.