Nick Clegg has said he is pushing his Tory coalition partners to agree to cut income tax bills by another £100.
The government has repeatedly raised the personal allowance - the amount people can earn before paying income tax - since the 2010 election.
The threshold is due to reach £10,000 in 2014/15 but Clegg wants to make it £10,500 from 2015 - a move that would cost the Treasury £1bn.
Conservatives said they would consider it but any changes must be "paid for", according to the BBC.
Deputy prime minister and Lib Dem leader Clegg said raising the personal allowance to £10,000 - a tax cut "worth £700 to millions of people" - was a "huge step" which he had been campaigning on for years.
And he said he wanted to raise the threshold by another £500 as a "workers' bonus".
The cut would be worth £100 a year to 24 million ordinary rate taxpayers, while taking around half a million people out of income tax altogether.
Clegg said his preferred method of paying for the tax cut would be to raise taxes on the "super wealthy" through a "mansion tax" but he said the Conservatives would not agree to this.
He told the BBC's Andrew Marr programme "we will find other ways" to fund the policy.
"It's not agreed yet. It's something I would like to see us deliver as a coalition government in the next budget," he added.
The basic rate of income tax is 20% so an extra £500 on the personal allowance would cut tax by £100 for anyone earning £10,500 or more, though people earning over £100,000 get reduced personal allowance or none at all.
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