Tax credit

1.

A reduction in a tax liability, directly reducing the net amount of tax payable.

For example, the tax credit under the 'imputation system' which wholly or partially imputes to the shareholders some of the corporation tax paid by companies on the income out of which dividends are paid.

In some circumstances a net amount of tax repayable, resulting from certain types of tax credit, can be refunded to the taxpayer in cash.

In the UK, dividend tax credits could formerly be reclaimed by non taxpayers - such as pension funds - in cash. This is no longer the case. The dividend tax credit can only be set against tax which would otherwise be payable.

2.

Less commonly, a smaller indirect reduction in a tax liability, by way of a deduction from the net taxable profits.

3.

UK personal tax.

A payment from the UK tax authorities to an individual with childcare responsibilities, low income, or both.

See also

• Credit
• Credit relief
• Expense relief
• Deductions
• Dividend
• Foreign tax credit
• Imputation system
• Income Tax
• Tax relief