Rachel Reeves's expected stealth tax could slash incomes for 1m and clobber pensioners

Pay packets for one million Britons could be slashed by an expected in Rachel Reeves's upcoming Budget.

And the anticipated move could mean poorer pensioners, already set to suffer the loss of the winter fuel payment, they currently do not have to.

Having promised no more austerity, the Chancellor is widely expected to raise taxes in the to plug what she claims is a £40billion black hole left by the Tories.

But after Labour promised during the General Election campaign , her fiscal room for manoeuvre is tight.

The Treasury has so far not commented on Budget speculation. However, it is widely believed the Chancellor will extend the freeze on the the basic, higher and additional rates of income tax.

At the moment, people of their earnings and only pay 40% on earnings over £52,271. Earnings over £125,140 are taxed at 45%.

But while freezing those levels is not technically a tax rise, more people will be as their salaries rise, meaning they would give more to the Exchequer.

The move would raise about £7billion for the Treasury. But a graph produced by the Institute of Fiscal Studies (IFS) think-tank showed that elderly people on the state pension by 2027-28.

The IFS said extending the freeze by two years would bring another 400,000 into paying tax and 600,000 into the higher and additional rates.

Tom Wernham, research economist at the IFS, said: "Whilst avoiding a headline-grabbing tax rate increase, freezing tax thresholds is a less transparent and more uncertain way for the Government to raise revenue."

He pointed out that the money such a measure would raise can fluctuate widely because than predicted.

And he argued the move would just be "postponing the pain to the taxpayer to after 2027-28".

It is also highly anticipated that Ms Reeves will in the Autumn Budget.

The Chancellor has been dubbed "Rachel Thieves" by the Tories for her expected tax hikes, while Labour MPs are scared that unpopular Budget announcements .