Councils and housing associations can charge near or full market rents to tenants with a combined income of £60,000.
Mr Osborne will unveil plans in his Budget to hit households earning half that in a drive to cut what Tories call “taxpayer-funded rent subsidies”.
It is expected to raise around £250million a year from 2018.
The squeeze comes as Mr Osborne’s allies confirmed he will help rich families by lifting the couples’ inheritance tax threshold to £1million.
A Labour source said: “Osborne is cutting inheritance tax for his rich pals, yet he wants to put rents up for ordinary, hard-working families.”
Households on £40,000 or more in London and £30,000 elsewhere could be charged a “market or near market rent” from April 2017.
It will be up to cash-strapped councils and housing associations to decide how much to raise rents. Charities fear tens of thousands of families will have to move.
Some councils are already charging “affordable” rents of 80 per cent of full market rent, forcing many out.
Whitehall sources say social housing tenants on higher incomes benefit by an average of £3,500 a year from reduced rent.
They represent around 9 per cent of the 3.7million social housing tenants in England.
An estimated 40,000 tenants are in households with an income of £50,000 or more. Another 300,000 households are on at least £30,000.
Additional rent taken by councils would be used to cut national debt. Housing associations will be able to spend the extra on cheap homes.
Tory ministers have highlighted the unfairness of wealthier tenants having council homes by pointing to former Labour MP Frank Dobson who lived in a council property while on more than £100,000 a year as a minister.
The Budget
Inheritance tax
The Chancellor will confirm the end of inheritance tax on family homes worth up to £1million.
He will say the threshold at which it is levied will rise for couples from £650,000 to £1million after April 2017.
George Osborne first promised to lift the threshold to £1million in 2007. At present, inheritance tax is payable at 40 per cent of the value of an estate over the tax-free allowance of £325,000 per person.
Married couples and civil partners can pass the allowance on to each other.
Income tax
The Chancellor is under mounting pressure from Tory MPs to further cut the top rate of tax from 45p to 40p.
He cut the rate paid by people earning more than £150,000 a year from 50p to 45p under the Tory-Lib Dem coalition.
Labour had increased the rate from 40p to 50p in 2009 after the financial crash.
Nom doms
An estimated 116,000 non-doms face an increase in the £30,000- £50,000 annual charge they pay for preferential tax status.
The 200-year-old rule, favoured by top executives and oligarchs, means people who are ‘non-domiciled’ do not have to pay income or capital gains tax on any overseas money unless they bring it into the UK.
Child tax credit
The Chancellor is expected to slash in-work tax credits – mainly child tax credit – as he moves to save £12billion.
Firms will be encouraged to raise wages to make up the shortfall.
The Government has abolished targets to cut child poverty and campaigners fear cutting child tax credits will hit the poor hardest.
Chris Leslie - Georeg Osborne has finally revealed his plan
In March George Osborne delivered a Budget for the “long term”.
Four months later he has a different Budget.
What will he do that he wouldn’t set out before the election? Is the Chancellor’s real long-term plan just to get into No 10? Britain deserves better.
Global uncertainty and a widening trade deficit with Europe underline the need to boost our productivity and prosperity.
His Budget must help working households, offer better roads, railway lines and airports, and help businesses grow.
The Chancellor will also have to finally detail his cuts. We do need to reduce the deficit and action on welfare fraud but wrong choices could cost more in the long run.
Tax credits lifted millions out of hardship. I hope working people, business and poor children are at the heart of this Budget, not George Osborne’s own ambition.
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