Britain’s EU budget contributions are set to soar by almost £500 million this year.

Brussels has sewn up a deal to increase its overall budget by £3.8 billion to an eye-watering £110 billion a year.

The inflation-busting increase takes Britain’s annual contribution to the EU's budget to £12 billion - up to £420 million once a rebate has been applied.

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George Osborne has boasted about keeping a lid on Britain's contributions to the EU - but is facing another £500 million increase this year

The decisions will be discussed by ambassadors later today and will be voted on by the European Parliament later this month.

The £420 million comes on top of the approximately £11.6 billion that David Cameron has already agreed to pay in 2014.

It is also separate from the £700 million ‘surcharge’ which George Osborne agreed last month to pay Brussels after Britain’s economy was found to have outperformed other European countries.

Downing Street said the EU’s next seven-year budget, which starts this year, would still be smaller than the last seven-year budget in real terms.

Open Europe’s Pawel Swidlicki said: ‘The latest inflation busting increase in the EU Budget shows why it is so important for David Cameron to push through radical changes to the way the EU spends taxpayers cash.

‘Cutting back outdated farm subsidies and returning control over regional development funds for wealthy countries like the UK would save billions.’

EU Commission President Jean-Claude Juncker has agreed an increase in the EU budget to £110 billion

Campaign group Business for Britain warned the budget hike was likely to only be ‘the start’.

Matthew Elliot, the chief exec, said: ‘Increases in the EU Budget are more frequent than visits from Santa Claus, but a lot less welcome.