Every penny raised from cracking down on wealthy tax dodgers will fund tax cuts for middle and low earners under Liberal Democrat plans, Nick Clegg has said.
The Lib Dems will fund increases to the Personal Allowance to £12,500 with money raised from evasion and avoidance after the job of deficit reduction is complete by 2017/18.
Liberal Democrats will also increase the tax rate on dividends for higher and additional rate taxpayers to fund a commitment to increase the threshold to £11,000 in the first year of the next parliament.
The detailed plans come after the Lib Dems delivered on their 2010 commitment to raise the Personal Allowance to £10,600, which will deliver a tax cut worth £825 to those on middle and low incomes.
By contrast, it has been revealed that Labour tax plans will leave people £340 worse off a year.
Commenting on the Lib Dem tax cut policy, Nick Clegg said: "This is about fairness. The Liberal Democrats want to continue cutting taxes for middle and low earners, just as we have done every year in government. The Conservatives want bigger tax cuts for the wealthy, paid for by the poorest.
"The Liberal Democrats' job in government has been to fix the economy in the fairest way possible. We have had to drag the Conservatives to that position.
"Now they want to veer off from the balanced approach of the coalition so they can help their friends in big business and big houses by cutting public services much more deeply than necessary.
"Only the Liberal Democrats will make sure our recovery is strong, stable and fair. We will cut less than the Conservatives and borrow less than Labour."
Chief Secretary to the Treasury Danny Alexander said: "At every Budget and autumn statement, Nick Clegg and I have made increasing the personal allowance our number one priority- the same cannot be said of the Tories.
"Before the election it was inheritance tax cuts for the very wealthy. Then it was reducing the top rate of tax. Then it was introducing a tax penalty for single people. And now they're back on inheritance tax cuts.
"We have had to fight tough and nail with the Conservatives to deliver the biggest set of tax cuts in a generation. The personal allowance is only going to £10,600 because the Lib Dems fought for it.
"During this general election, there is only one party with a track record of promising tax cuts on the front page of its manifesto and delivering them to the pockets of middle and low income families up and down the country. That is the Liberal Democrats."