A Liberal Democrat government will make further cuts in Income Tax and reduce National Insurance for millions of workers under manifesto plans announced today.
The party plans to raise the personal allowance to at least £12,500 by the end of next Parliament.
This move would cut income tax for 30m workers and be worth £400 per year to a typical basic rate taxpayer.
Pensioners have not benefitted from the previous increases in the personal allowance, but the increase to £12,500 will benefit more than 6m pensioners.
And in a new proposal announced today, Liberal Democrats will seek to raise the amount people can earn before paying National Insurance once the personal income tax allowance has reached £12,500.
Commenting Liberal Democrat Chief Secretary to the Treasury Danny Alexander said:
"Our tax system must be fair and help to make being in work pay. That's why cutting income tax for working people, particularly those on low and middle incomes, is a top Liberal Democrat priority.
"It was on the front page of the 2010 Liberal Democrat manifesto and we have fought to keep it on the agenda at every Budget. By April next year we will have delivered a tax cut to over 26 million people worth £800 a year to a typical basic rate taxpayer and taken over 3 million out of tax altogether.
"Now we want to go even further and lift the amount of money people can earn before paying income tax to £12,500. This will take hundreds of thousands more low earners out of tax altogether and give millions of working people a further tax cut of £400.
"This move will also give a tax cut to over 6 million pensioners. When we've reached £12,500 we will seek to raise the level that people start paying employee National Insurance.
"The Liberal Democrats are the only party in British politics with a long-term commitment to cutting taxes for the working people of Britain. We've delivered the largest programme of tax cuts for a generation over the last four years, despite all of the other financial pressures.
"These manifesto commitments will mean nothing less than a generational shift to a fairer tax system that rewards work and helps working people. That's the way to build a stronger economy and a fairer society and ensure that everyone has the opportunity to get on in life."