Ms Truss’ approach would mirror the models used in Germany and the United States and ensure that Britain no longer imposes the highest tax burden on families among countries that are part of the Organization for Cooperation and economic development.
A source close to Ms Truss said: ‘Liz believes supporting families and carers is crucial to Britain’s future success and would put her first as Prime Minister.
“We need to do more to make sure people who are caring for children or elderly parents aren’t penalized 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 that people pay to be able to access services, but if they do not use these services and do not take care of their family members themselves, they should be better supported to do so.”
The plans go much further than David Cameron’s existing tax relief for married couples.
Currently, a member of a married couple who earns below the £12,570 income tax threshold can transfer £1,270 of their allowance to their spouse, reducing their tax bill by up to £252 £ per year.
The review proposed by Ms Truss would aim to extend eligibility to all cohabiting couples, while significantly increasing tax relief.
Treasury officials will consider allowing people to transfer their entire £12,570 personal allowance to a partner.
That would be up to £2,514 per year per couple, as the basic rate of income tax is 20%.