Tax Credits Explained

Tax Credits Explained

More than six million families and 600,000 workers on a low income collect tax credits, the system relaunched in 2003 by Gordon Brown to alleviate poverty. Here is a guide to the scheme.

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History of tax credits
The original tax credit system were introduced in 1998 to encourage the unemployed back to work, with a particular focus on single mothers. In April 2003 the system was reformed with the establishment of two forms of tax credit, Working Tax Credit and Child Tax credit. Since the scheme was relaunched tax credits have become synonymous with overpayment problems.

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History of tax credits

The original tax credit system were introduced in 1998 to encourage the unemployed back to work, with a particular focus on single mothers. In April 2003 the system was reformed with the establishment of two forms of tax credit, Working Tax Credit and Child Tax credit. Since the scheme was relaunched tax credits have become synonymous with overpayment problems.

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Failings in the system continue. In May 2008, it was estimated that the Treasury had overpaid billions, (£1,000,000,000) of pounds in tax credits over the last four years which were unlikely to be clawed back in total by the government.

Meanwhile, low income workers and families who deserve tax credits are expected to leave billions of pounds worth of the credits unclaimed in the 2008/2009 tax year.
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