INCREASING numbers of middle-income earners across Dorset and Hampshire will get dragged into the higher tax bracket in next month's Budget, it is feared.

Chancellor Gordon Brown will use his March 21 Budget to stealth-tax families by not raising tax thresholds in line with the real cost of living, warn accountants.

It is a technique he has used repeatedly with Inheritance Tax and the concern is that he could do it once again with Income Tax.

Gordon Brown is also likely to use climate change as an opportunity to levy more environmental taxes, warns PricewaterhouseCoopers' South coast team.

PricewaterhouseCoopers predicts fuel price hikes but there may be Budget concessions in the form of incentives for green energy generation and lower VAT on energy-saving products.

PricewaterhouseCoopers tax partner Leonie Kerswill said: "Further environmental measures, progress on tax simplification and a continuation of the focus on cutting red tape are likely to be high on the Chancellor's agenda for this Budget.

"But despite rising house prices - which are driving more and more people into the Inheritance Tax net - there is little sign of any significant change."

Business owners could be hit by changes to the tax rules on dividends.

There could also be a review of employee car ownership schemes.

HM Revenue & Customs believes that firms may be using them as a way of sidestepping company car rules.

PricewaterhouseCoopers Southampton-based tax partner Geoff Briggs forecasts a possible cut in Corporation Tax for small firms.

"There's a good argument that companies would prefer a reduction in the rate of tax, rather than additional incentives which add complexity," he said.