George Osborne expected to cut tax for higher earners paying the 40 per cent rate

People earning £42,385 are likely to benefit

Chancellor George Osborne (PA)

The Chancellor is set to cut the 40 per cent rate of income tax for higher earners, according to reports.

George Osborne is to deliver his emergency budget on Wednesday, his first with a majority Conservative government and his party’s first since 1996.

The Tories promised to raise the level above which people pay the tax rate to £50,000 by the end of the parliament.

Mr Osborne but appears to be bringing forward his policy, however, which will see it the level lifted from the current level of £42,385, according to the Daily Telegraph newspaper.

The tax is currently only paid by around 800,000 people, or roughly the highest paid 15 per cent of income tax payers.

Those in line to inherit homes worth £1m are also in line for a tax cut, costing the Treasury around £1bn.

The Chancellor is expected to resist calls to cut the top 45p rate of income tax, however.

He will also reveal more about where he will make £12bn cuts to the welfare budget.

The Institute for Fiscal Studies says Mr Osborne announced roughly £1.5bn of the £12bn cuts before the election.

He is expected to make additional savings by cutting tax credits, which could save as much as £5bn depending on the scale of cuts.

A lower benefit cap outside London is also expected, as well as higher rents for some people living in social housing earning above-average incomes.

Measures previously outlined include a benefit cap and banning young people from claiming housing benefit.

BBC News however reports that the cuts will be spread across three years rather than due because of a tax windfall caused by pension reforms.