The higher rate income tax threshold will rise to £45,000 next year, George Osborne said today.
And the chancellor announced in his Budget an increase in the personal allowance threshold to £11,500 from April next year.
The higher rate income threshold is currently £42,385 and is due to rise this year to £43,000. It will now be raised a further £2,000 in April 2017.
Osborne said: "That’s a tax cut of over £400 a year.
“It is going to lift over half a million people who should never have been paying the higher rate out of that higher tax band altogether.”
The personal allowance is currently £10,600.
This is due to rise to £11,000 this year and will now be raised by another £500 next year.
"The government was elected to back working people," Osborne said.
"And the best way to help working people is to let them keep more of the money they earn."
The chancellor told the House of Commons this represented a tax cut for 31m people and means a "typical basic rate taxpayer will be paying over £1,000 less income tax than five years ago".
The personal allowance threshold was £6,500 when Osborne became chancellor.
He has pledged the raise this to £12,500 by the end of this Parliament.