The Financial Times reports that from tomorrow there will be
…marked changes to the government’s complex tax credit system. The first reduction is for 850,000 families losing all their child tax credit, worth about £545 a year. The second is up to 212,000 working couples losing their working tax credit – of up to £3,870 a year – if they are unable to increase their weekly working hours from 16 to 24.
Tax credits are payments from the government.
Wikipedia has a general definition:
A tax credit is a sum deducted from the total amount a taxpayer owes to the state.
So assuming “tax credit” does not mean something else in Britain (and I would not put it past politicians to play such games with words), what we have here is a large tax increase for poor people who nonetheless work.
Here’s a hint to any future chancellor: you get more of what you reward.
Update: In the comments, Paul Marks says that “tax credit” means welfare and that most people who get tax credits do not pay income tax.