The Conservatives will increase the personal tax allowance to £12,500 and up the 40% income tax threshold to £50,000 during the next Parliament – if they win the General Election in May.
Raising the personal allowance to £12,500 (which is also the annual income earned by those on minimum wage) would mean 30 million households would be lifted out of tax altogether by 2020, the Prime Minister said.
At the moment, the 40% tax rate kicks in when someone's income reaches £31,866, but with the current personal allowance of £10,000 people do not effectively pay 40% tax until they earn £41,866 or more.
The new pledge means that the 40% tax rate will not kick in until income reaches £40,000 or £50,000 after the personal allowance is taken into account.
However, with Cameron also proposing the rise in personal allowance to £12,500, it means that when both of Cameron's pledges kick in, people won't pay 40% tax until they earn £52,500 or more.
Get out what you put in
The Prime Minister, in a speech widely regarded as one of the best of his career, said the increases would be introduced during the next parliament, which will run for five years.
"I want you to take home more of your own money," he said, as he addressed his party conference in Birmingham.
"'Once you have a job, I want you to take home more of your own money. If you put in, you should get out – not hand so much of it to the taxman," he added.
Commenting on the increase to the personal allowance, Calum Bennie, savings expert at Scottish Friendly, said: "At today's conference, the Prime Minister reiterated the government's support for those willing to save over the long-term. While the sentiment is sound, the practicalities of saving in the current economy are not as simple as that.
"In reality, low levels of disposable income across the UK means that nearly one in three adults regularly have to dip into their savings each month to help pay for monthly outgoings. That said, promises to raise the tax-free personal allowance from £10,500 to £12,500 offer an incentive to those currently unable, but willing, to save over the long term."