Deputy Prime Minister Nick Clegg is calling for a further increase to the personal allowance to £10,500 from next April.
The income tax personal allowance is currently £9,440 and will reach £10,000 next April after rising from £6,475 in 2010.
Speaking to the BBC yesterday, Liberal Democrat leader Clegg said the rise, costing £1bn, should be paid through a tax on the ”super wealthy” but suggested the Conservatives would not agree.
The move, which Clegg branded a “workers’ bonus”, would take 500,000 more people out of paying income tax.
He said the Government would find “other ways” of paying for the rise in the next Budget.
He said: ”Having achieved that great figure, that great threshold of £10,000, we need to go further.
“Because the recovery is finally taking hold, I think it’s very important that as many people as possible feel that they are benefiting from it.”