Lib Dems promise to raise personal tax allowance to £11,000 by 2016

Nick Clegg tries to put space between his party and the Tories

Deputy Prime Minister Nick Clegg speaks at the Liberal Democrat Autumn conference on 6 October (Getty Images)

The personal tax allowance would be raised to £11,000 in April 2016 if the Liberal Democrats remain in coalition after next year's election, Nick Clegg announced today.

He tried to set out a distinctive tax policy after the Conservatives last week matched the Lib Dem pledge to raise the amount of tax-free earnings to £12,500 by 2020.

The Deputy Prime Minister also unveiled long-term plans to help people earning £8,000 a year by raising the starting rate for national insurance to the same level as for income tax. But that would not happen until after the tax allowance hit £12,500.

Mr Clegg departed from the Tories, who declined to say how their £7.2bn package of tax cuts would be funded, by saying his £1.5bn tax cut would be financed partly by raising the rate of capital gains tax for higher rate (40p) taxpayers from 28 to 35 per cent.

He also rejected the Tory plan to help middle income earners by raising the 40p rate threshold, saying it was better to help those at the bottom by increasing the personal allowance.

The proposed £11,000 allowance would give a £100 tax cut to 29m people. It would be announced in the Autumn Statement of 2015, so it would kick in in April 2016.

Mr Clegg said: "It's easy to promise a tax cut, it's much more difficult, especially in the current economic situation, to say who pays. We are clear that we will pay for this tax cut for millions of working people by asking wealthier people to contribute more."

He added: "This is about priorities. The Conservatives may have copied our flagship policy but they would pay for it in a deeply unfair way – by hitting the working poor.

"And the Conservatives want to cut taxes for the better off by nearly five times as much. The difference between the Liberal Democrats and the Conservatives is that we want to cut taxes for working people, paid for by the wealthiest, they want to cut taxes for the wealthiest, paid for by the working poor."