The Liberal Democrats will outline plans later today for “the most radical tax reform in a generation”.
The party will pledge to scrap income tax for four million low earners – those on less than £10,000 a year – if it wins the next general election.
It says it would fund the measure by introducing an annual 1% tax for those owning homes worth more than £2m.
This is an increase in the property price threshold from the original £1 million whilst the tax rate itself will be increased from 0.5% to 1%.
That would mean a person living in a house worth £2.5m paying an extra £5,000 a year in tax.
The party argues that by raising the threshold at which people start paying income tax to £10,000 this will leave poorer families about £700 a year better off.
But four million top-rate taxpayers will lose out as they will no longer be able to claim tax relief on their pension contributions at the higher rate.
Liberal Democrat leader Nick Clegg has said he wants to make Britain’s tax system “fairer”, cutting the burdens on “struggling families” and closing “loopholes” in capital gains tax and pension tax relief for the better off.
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