Analysis by the House of Commons library shows that the government’s plans to freeze income tax thresholds until 2025-26 will mean that an additional 1.25m people will be brought into the 40% tax bracket due to the current rapid wage and price inflation.

The research, commissioned by the Liberal Democrats, also found that 1.5m people on a low wage will be brought into paying the basic level of income tax.

Based on the latest inflation forecasts from the Office of Budgetary Responsibility (OBR) if the freeze was not in place by 2025-26 the higher rate threshold would increase from £50,270 to £56,270 and that the personal allowance would increase to £14,070 from £12,570.

The report highlights that the costs attributable to the freeze in the basic rate limit would be larger if it looked only at income tax alone however, the freezing of the basic rate directly lowers National Insurance contributions (NICs) for those with earnings above the higher rate threshold.