The higher rate threshold will increase for the first time this parliament from £41,450 to £41,865 next month.
It will then rise by a further 1% to £42,285 next year.
“People earning £42,000, £43,00, £50,00, £60,000 all the way up to £100,000 will be paying less income tax because of this Budget,” Osborne said.
The move follows pressure on the chancellor to make the increase from Tory MPs with an eye on the next election.
The Institute for Fiscal Studies (IFS) has said previously that, compared with the state of play when the coalition government took office four years ago, the higher rate threshold has dropped by £4,910, creating an extra 1.1 million higher rate taxpayers.
As a result there are 4.4 million higher rate taxpayers, and a further 313,000 who pay the 45% additional tax rate on top.
The measure was announced as part of Chancellor George Osborne’s fifth Budget, and the penultimate package before the next general election.
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