Lib Dem manifesto targets middle classes and tax avoidance

The Liberal Democrats will impose a sweeping crackdown on tax avoidance and the middle classes in efforts to generate the £16.7bn needed to pay for the scrapping of income tax below a £10,000 threshold.

The party set out its stall in its election manifesto released today, detailing a raft of measures that would be imposed in efforts to support the lowest paid.

The scrapping of the threshold will be bankrolled by:

* Only giving tax relief on pensions at the basic rate so everyone gets the same tax relief on their contributions, bringing in more than £5bn.

* A clampdown on the aviation sector, which would generate more than £3.2bn while overhauling capital gains tax to closer align it with income tax, putting £1.9bn into the UK's coffers.

* Anti-avoidance measures worth £6.95bn relating to income tax National Insurance and corporation tax also figured in the Lib Dems' plans.

Collectively all the proposals would bring in more than £17bn, the party said.

The Lib Dems also hinted that they would reverse the proposed NI rise, but only when the funds were in place to do so.

"While it will be impossible to remove the government’s tax rises while the deficit is so huge, the increase in National Insurance contributions is a damaging tax on jobs and an unfair tax on employees, so when resources allow we would seek to reverse it."

The manifesto went into further detail about how the Liberal Democrats would achieve their objectives:

* As part of its anti-avoidance efforts, HM Revenue & Customs would be given increased powers.

* Non-domiciled indiviuals would start paying tax on offshore income after seven years.

* Those who use second homes as a speculative investment will pay tax on the enhanced capital value at the same rate as on earned income, not at the present 18%.

* The Lib Dems would also reform Gift Aid rules to operate at a single rate of 23%, giving more cash to charities while "closing a loophole for higher rate taxpayers".

* Controversially, the party would also give local authorities the power to set higher council tax rates for second homes.

* In the backdrop of the Lord Aschroft revealing his non-doms status, all Lords, MPs and parliamentary candidates would be required to be resident, ordinarily resident and domiciled in Britain for tax.

* The Lib Dems would also pilot a local income tax "based on people's abiltity to pay it" rather council tax.

* The party also added that a reduction in the use of consultants by the public sector, often accountancy firms, would save £735m between 2011-2015.

* The National Lottery would be also be taxed on gross profits as opposed to per ticket bringing in more cash to the Exchequer.