Rejoining EU single market and customs union would allow us to cut your taxes, Lib Dems say

Sir Ed Davey has pledged to cut taxes by striking a deal with the EU to rejoin the single market and customs union to boost growth.

The Liberal Democrat leader has unveiled his plan to raise the tax-free personal allowance to £15,000 and increase the higher rate threshold from £50,270 to £56,000 in a keynote speech closing his party’s annual conference on Tuesday.

Sir Ed said his plan to “slash the Brexit red tape” by joining the single market and customs union will bring “down barriers to trade”, creating the growth needed for his tax plans.

“ Last year, I set out our plan for a new customs union, to slash the Brexit red tape,” he told the party conference in Brighton.

“Now I’m going further, because this moment demands it. Not just a customs union, but joining the single market too.

“Bringing down those barriers to trade. Breathing new life into our economy. And bolstering our collective security too.

“So I’m announcing our plan to raise the tax-free personal allowance to £15,000. Taking 2 million more people out of paying tax altogether, and giving most taxpayers a £680 tax cut.

He added: “Growing our economy with Europe. Backing our great British businesses. Putting money back into people’s pockets.”

The plan, which requires the party striking a deal with the EU in the first year of the next parliament, will also raise the additional rate threshold to £130,000.

Under the plans, the Liberal Democrats would unfreeze the tax threshold currently in place until 2031, paid for by an estimated 0.5 per cent growth in the economy brought by rejoining the single market and customs union.

Tax thresholds will then be raised over the remaining the five year plan, which is estimated to cost £17 billion in its final year and be funded by dividends from the party’s plan for a new Growth and Defence Plan with Europe.

Then-chancellor Rachel Reeves announced at the Budget in November 2025 that a freeze on income tax thresholds will continue until 2030/31, meaning more people are likely to experience so-called “fiscal drag” and find themselves paying the higher rate.

Sir Ed said the policy was now “holding back teachers and nurses”, rather than those in traditionally higher earning jobs.

“The post-Brexit stealth taxes have pulled more and more people into paying that higher rate tax,” he said. “Thirty years ago, just 2 million people paid it. Now it’s 9 million.