The tax-free personal allowance is being raised to £11,500 with the Chancellor declaring 31 million people will be paying less tax and 1.3m of the lowest paid taken out of tax altogether.
Mr Osborne also announced the higher rate threshold will rise from £42,385 to £45,000 from April next year, taking more than half a million people "who should never have been paying the higher rate out of that higher tax band altogether".
The lower growth forecast for the economy means the Chancellor will have to raise taxes or make drastic cuts, the economic think-tank said.
The Budget seems to be a return to 'nudge, nudge' politics which looks at behaviour, the cost of dealing with it, and makes a calculation.
Around 20 Tory backbenchers wrote to the Chancellor, even before the Budget was delivered, to outline their concerns about the measure.