A total of 14 out of 20 DIY kits tested were found to contain high levels of the chemical more commonly found in hair dyes, with high quantities in tooth whitening causing damage to the mouth.
'Many people these days aspire to having the perfect Hollywood smile and some stars have paid a lot of money to achieve this through cosmetic dental treatment" said Ron Gainsford, chief executive of TSI. '
There are much cheaper kits on sale for home use - for instance, some of those tested by trading standards cost as little as £14.
But this could end up burning more than a hole in your pocket.
Our tests found high levels of hydrogen peroxide, which can aggravate gum disease and cause sensitive teeth - or even chemical burns to the mouth.
As tooth whitening continues to grow in popularity consumers are increasingly seeking cheaper alternatives to the expensive option of having the teeth professionally coloured.
Therefore the trend for at home tooth-whitening kits is growing, with more and more consumers opting for the cheaper alternative.
However, with one of the tested products being 230 times over the legal limits the TSI has highlighted a rise in the dangerous levels of chemicals found in formulations.
Only two of the products, which were purchased over the internet or in beauty shops across the Midlands, complied with the Cosmetics Products (Safety) Regulations - guidelines that ban the sale of tooth whitening kits that contain more than 0.1 per cent hydrogen peroxide.
'The remaining 14 contained amounts of hydrogen peroxide ranging from 0.24 per cent to an incredible 23.8 per cent, ' said Alex Rankin, a spokesman on safety for the Central England Trading Standards Authority and principal trading standards officer for Telford & Wrekin Council in Shropshire.
The issue has raised concerns over whether the Cosmetic Products (Safety) Regulations should also regulate dentists, as there may be individual occasions where a fully qualified dentist could decide that a patient can be treated safely with a product containing a higher level of hydrogen peroxide.
'However, at present anyone manufacturing or supplying a teeth whitening product - including dentists - with a higher concentration of hydrogen peroxide than 0.1% is in breach of the Cosmetic Products (Safety) Regulations and could face action by trading standards authorities,' said Mike MacGregor, operations and development manager for Hertfordshire County Council Trading Standards.
Tooth whitening products have been dogged by criticism for a while.
However, a review carried out late last year dismissed previous claims hydrogen peroxide used as a whitening agent can be linked to oral cancer.
After a review of the clinical and laboratory data on tooth whitening, Dr. Ian Monroe claimed in the Journal of Esthetic and Restorative Dentistry, there is no evidence to suggest the process accelerates or encourages the development of oral cancer, despite former worries by the European Commission.
A statement from the journal said: 'Common tooth whitening products, which have been used by millions of people, are found to be safe and do not increase the risk of oral cancer when used as directed.'
The findings were thought to prove significant to the $500 million tooth whitening industry, which has been plagued with concerns over the use of hydrogen peroxide and the effect it has on consumer's health.
Previous suggestions that all tooth whitening products should only be used after consulting a doctor, inhibiting mass retail plans for manufacturers in the US.