01: Introduction

The tax credit system is at the heart of the Government’s strategy to reduce poverty by encouraging people to work rather than stay at home. The aim of this overview and our PDF guide 'Child and working tax credits' is to describe how the system works. Currently, a surprisingly large number of people may qualify for some kind of tax credit – by no means just the very low paid – but this is likely to change in the next few years.

Tax credits have proved to be controversial largely because of the complexity of their structure and administration. HMRC has found it very difficult to calculate the correct level of payments for a high proportion of claimants, leading to considerable inconvenience and in many cases distress, especially where a family has received a payment and then later been asked to pass it back to HMRC.Last Updated