Liberal Democrats will cut people's income tax bill by £700

12.00.00am BST (GMT +0100) Mon 20th Apr 2009

The Liberal Democrats will fight the next general election with a pledge to cut income tax bills by £700 for people on low and middle incomes.

The party will promise to raise the income tax personal allowance to £10,000 by closing tax loopholes exploited by big businesses and the wealthy.

Measures which will be used to pay for this proposed increase in the personal allowance include:

• Restricting tax relief on pension contributions to the basic rate

• Taxing Capital Gains at marginal income tax rates, allowing for indexation and retirement relief

• Tackling Stamp Duty Land Tax avoidance and Corporation Tax avoidance

• Subjecting benefits in kind to National Insurance Contributions as well as income tax and applying National Insurance to multiple jobs

• Switching aviation taxes from per person to per plane and increasing taxation on non lifeline domestic flights.

Speaking at the launch, Nick Clegg said:

"These plans will give money back to the people who really need it at the time when they need it most.

"For too long governments have been letting companies stash their money in offshore tax havens while taxpayers are left to foot the bill.

"Over time a tax system has developed that creates loopholes for the wealthy and does nothing for those who really need help.

"Our plans wouldn't add a penny to the overall tax burden, but they would spread that burden far more fairly.

"Far from making this reform difficult, tight Government finances and a harsh recession make it absolutely vital. It will help millions of low and middle income taxpayers who are most likely to spend money so helping the wider economy.

"The Liberal Democrats will create a fundamentally rebalanced system that is fair for all, putting hundreds of pounds back into the pockets of millions of British people, and taking four million out of paying tax altogether."