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 This benefit was then withdrawn. The dividend tax credit could then only be set against amounts of tax which would otherwise have been payable.
With effect from April 2016, the dividend tax credit is abolished for UK taxpayers.
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.
