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George Osborne risked a backlash from Tory MPs today after leading economists predicted that two million more people will have been dragged into paying the 40p rate of income tax under the Coalition.

The Institute for Fiscal Studies said the number paying the higher rate was due to rise by 600,000 in the two years to 2015/16 to reach 5.3 million.

“There are likely to be two million more higher-rate taxpayers in 2015/16 than there were in 2010/11,” said IFS director Paul Johnson.

Those on middle incomes are being caught by the 40p rate as the threshold for paying it rises from £41,450 by only one per cent for each of the next two years — below average pay increases.

Many of the additional 40p taxpayers are expected to be in London where wages are higher than in other regions, although they are also benefiting from the raising of the starting threshold for paying income tax to £10,500.

But the capital will be hard hit by a predicted £37 billion nationwide tax grab from the Treasury over five years through extra stamp duty and inheritance tax.

The IFS also warned that:

The Chancellor’s pensions revolution was likely to lead to some people who are buying annuities being worse off, though it backed the thrust of the “liberalising” reforms.

Government departments, apart from a few including health and overseas aid, faced cuts which could be even bigger after 2015 than in this Parliament.

A future Chancellor may have to find some £2 billion in savings to off-set revenue which is being “frontloaded” into the Treasury in a clampdown on tax avoidance and taxation changes on pensions.

Mr Johnson added: “This is a Budget which will be remembered long after most of Mr Osborne’s other Budgets have been forgotten, and it will be remembered for one of the biggest shake-ups in the tax treatment of private pensions we have seen in a long time.

“But alongside these bold changes and some welcome changes to the taxation of savings, it is also a Budget which leaves us with as little sense as we had before of quite how the very large public spending cuts still in the pipeline will actually be delivered.”