The Liberal Democrats have pledged to raise the income tax personal allowance to at least £12,500 in manifesto plans announced today.
The party has also signalled it would seek to increase the amount people can earn before paying National Insurance once that threshold is reached.
Chief Secretary to the Treasury Danny Alexander confirmed the allowance would be increased by the end of the next Parliament.
The move would cut income tax for 30 million workers and be worth £400 per year to a typical basic rate taxpayer, the party claimed.
It would also see more than six million pensioners benefiting Mr Alexander said, and added that the tax system had to be fair and help being in work pay.
He went on: "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 three 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.
"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."
Shadow treasury minister Cathy Jamieson said nobody would believe a word the Liberal Democrats said about tax.
The Labour MP went on: " They backed the Tories in giving a huge tax cut to millionaires while breaking their promise not to raise VAT on everybody else.
"The Lib Dems should come clean about how they would pay for their promises. Will they just hit working families and pensioners by raising VAT again?"
According to Institute for Fiscal Studies (IFS) figures, families would be on average £973 a year worse off by next year because of the tax and benefit changes since 2010, she added.