New figures from HM Revenue & Customs (HMRC) show that the number of people in the 40p rate tax bracket will rise from 3.5 million to 4.6 million by the time of the next election.
Therefore, added to those paying the 45p rate, it means that higher rate taxpayers will stump up 67 per cent of Britain’s total tax bill by 2014/15, despite representing just 16 per cent of the population.
The so-called fiscal drag has brought more than a million additional middle earners into the 40p and 45p rates between 2011/12 and 2014/15. The figures also show that by 2014/15 the top 1 per cent of earners will pay 27.4 per cent of the tax bill, compared to 21.4 per cent a decade ago.
Although the fiscal drag has been lucrative for the Treasury, many Conservative MPs believe that people earning between £40,000 and £60,000, who would never consider themselves wealthy, are suffering from a high rate of tax at one end and rising food and energy bills at the other.
The 40p rate, which was introduced by then Chancellor Nigel Lawson 25 years ago, was designed to catch people just under the very wealthy bracket and this cohort accounted for only one in 20 earners at the time, whereas one in five pays the rate today.
To compound their misery, the earnings threshold at which people start paying tax at 40 per cent has traditionally increased in line with inflation to take account of rising living costs but now the threshold will only rise by 1 per cent until 2016, significantly below the current Consumer Prices Index (CPI) inflation measure of 1.6 per cent.
However, Chancellor George Osborne has ignored calls from within his party to scrap the 40p rate and raise the 45p rate instead, which many believe would bring in the extra income needed to plug the gap.