UK chancellor George Osborne

A cut in the top rate of UK income tax from 50p in the pound to 45p came in to effect today as part of a series of sweeping changes to tax and benefits system.

The measure was announced in Chancellor George Osborne's budget in 2012, and will apply for those earning £150,000 a year or more from 6 April.

As a result of the so-called "granny tax", the amount pensioners can earn before being taxed, or personal tax allowance, has been frozen at £10,500 instead of rising with inflation.

Millions paying the basic rate of tax will be an estimated £267 a year better off, with the amount people can earn without being taxed rising to £9,440.

In order to fund the reforms, an estimated 40,000 people have been brought into the 40 per cent tax rate, with the threshold falling to £41,450.

Other changes coming into force mean that Job Seekers Allowance and other working age tax credits and benefits rose by 1 per cent, below the rate of inflation.

State pensions rose by 2.5 per cent, to £110 per week whilst child benefits were frozen.

Shadow chancellor Ed Balls said in a statement that a family with one parent earning would be up to £4,000 a year worse off as a result of the changes, whilst millionaires could be up to £100,000 better off, citing figures from the Institute for Fiscal Studies.

"Is it really right today at a time when pensioners are paying more, when people on low incomes are seeing the hit from the bedroom tax, when all families are worse off, for the priority for the government not to change course on the economy, but to give a tax giveaway on this scale to people on the highest earnings?" Mr Balls asked on the BBC Radio 4's Today programme.

The Tories claim the cut to the top rate of tax is essential in order to attract investment to the UK and to stimulate growth.

Speaking to the BBC, Chief secretary to the Treasury Danny Alexander said the coalition government "is working hard to help those on low and middle incomes."

He added: "We think it's important that we make work pay, that we reward people who are working hard on ordinary incomes and that is what the increase in the personal allowance will do.

"The wealthy are paying more in every year of this government than they did during the entire period Labour was in office."

He said that the so-called "tycoon tax," announced in this year's budget, which restricts the tax relief for those investing in businesses and donating to charities, means that the rich will pay more tax under the coalition government than under the Labour government.