Liz Truss will bring in a major tax break if she gets into Number 10 to help those who take time off work to care for children or other family members.
At her first campaign event since getting down to the final two in the Conservative leadership election, the Foreign Secretary pledged to conduct an immediate review into the taxation of families to ensure carers are no longer penalised.
Her idea is to allow couples to transfer their personal tax allowance, which is the amount a person can earn before they start paying income tax - currently £12,570 each.
Ms Truss’s policy would mean a person taking time off work to care for a relative would be able to transfer the whole of their allowance to a working member of the household - saving couples up to £2,514 a year.
The policy would mean that the household would recoup some of the money lost by the decision of the carer to give up work.
Ms Truss said it was only fair that family carers who are saving the country £1 trillion a year by not using state-employed carers should get something back.
“Hard-working families are the bedrock of a stable society, and one of my top priorities as prime minister would be easing the tax burden on families,” she said.
“They don’t just look after themselves but also build communities, charities and even businesses.
“I want to make sure that our tax system works for them. We will review the taxation of families to ensure people aren’t penalised for taking time out to care for their children or elderly relatives.”
Ms Truss’ approach would reflect models used in Germany and the United States, and ensure Britain no longer imposes the highest tax burden on families among countries that are part of the Organisation for Economic Co-operation and Development.
A source close to Ms Truss said: “Liz believes supporting families and carers is crucial to Britain’s future success and would prioritise it as prime minister.
“We have to do more to ensure people looking after children or elderly relatives aren’t hit in the pocket for doing the right thing, and Liz wants to do that through reform of the tax system.
“The whole health and social care system is designed so people pay in to be able to access services, but if they are not using those services and looking after family members themselves, then they should be better supported to do that.”
The plans go much further than David Cameron’s existing tax break for married couples.
At present, one member of a married couple who earns under the £12,570 income tax threshold can transfer £1,270 of their allowance to their spouse, reducing their tax bill by up to £252 a year.
The review proposed by Ms Truss would look at extending the eligibility to all cohabiting couples, while dramatically increasing the tax break.
Treasury officials will consider allowing people to transfer their full £12,570 personal allowance to a partner.
This would be worth up to £2,514 a year per couple, because the basic rate of income tax is 20 per cent.