What are tax credits?

Tax credits are nothing to do with paying tax. They are a series of benefits introduced by the last Labour government to help low-paid families. There are two types: Working Tax Credit (WTC) for those in work, and Child Tax Credit (CTC) for those with children. Tax credits are gradually being included within Universal Credit, which is being rolled out across the country

Who qualifies for Working Tax Credit?

The idea of this benefit is to encourage people to work. As an example, most people will need to work at least 30 hours a week to qualify. If you have children, are under 25 or over 60, you will need to work 16 hours a week. You can earn a maximum salary of £13,253. Currently claimants earning less than £6,420 receive the full entitlement. As they earn above this level, their payments are reduced.

Who qualifies for Child Tax Credit?

To qualify for CTC you need to have at least one child, but you don't need to work. As an example, those with one child can earn up to £25,000 and still qualify for a payment. For those also claiming WTC, anyone earning less than £6,420 (the income threshold) will receive the full entitlement. For those not claiming WTC, they can earn up to £16,105 before seeing a reduction in their payments

What changes were planned for April 2016?

The income threshold for Working Tax Credits - £6,420 - is due to be cut to £3,850 a year. In other words, as soon as someone earns more than £3,850, they will see their payments reduced. The income threshold for those only claiming CTCs will be cut from £16,105 to £12,125. Osborne could tweak these thresholds.

The rate at which those payments are cut is also due to get faster. Currently, for every £1 claimants earn above the threshold, they lose 41p. This is known as the taper rate. But from April 2016, the taper rate will accelerate to 48p. So for every pound earned above the threshold, claimants will lose 48p. Again, Osborne could tweak the taper rate.

There are due to be similar reductions for those who claim work allowances under Universal Credit.

Who will be the losers?

The IFS has said that three million families are likely to lose an average of £1,000 a year, as a result of the previously announced changes to tax credits. But the government has argued that the introduction of the National Living Wage (NLW) will raise incomes for many people when it is introduced in April 2016. New personal allowance thresholds will also mean many people will pay less income tax. The Resolution Foundation - which campaigns for low and middle-income families - has analysed all the changes, taking into account the NLW and new income tax thresholds. It claims that by 2020, a low-earning single parent, with one child, who works 20 hours a week, and who earns £9.35 an hour, will end up £1,000 a year worse off. A low-earning couple with two children, also on £9.35 an hour, will be £850 a year worse off. However, a childless middle-earning couple will be £350 a year better off, as a result of the new personal tax allowance.

Credit unions in the United Kingdom

Credit unions in the United Kingdom were first established in the 1960s. Credit unions are member-owned financial cooperatives operated for the purpose of promoting thrift, providing credit and other financial services to their members. Credit unions in the UK now offer a wide range of services to their members; including current accounts, payroll deductions, standing orders and insurance.[1] Co-operative or mutual organisations engaging in cooperative banking, such as building societies, have existed in the UK since the 18th century.

Institutions known as mutual societies grew out of the friendly society movement of the 18th century, with the first mutual insurer, Equitable Life, being founded in 1762. Formalised under the Friendly Societies Act 1819, mutual institutions predated the welfare state and were formed to meet the needs of a growing urban working class. This communitarian self-help movement allowed small regular individual contributions to be pooled for mutual collective benefit, obtaining the same economies of scope and scale necessary for providing insurance and financial products. Mutual societies helped to raise funds for housing and consumer durables at a time when commercial banks were still exclusively commercial lenders.[2] Building societies were formed as small temporary societies by worker co-operatives, pooling resources to build local houses and subsequently allocating them among members by drawing lots. Once all members were housed, these organisations were typically wound up, although some became permanent societies in an effort to promote wider home ownership, as exemplified by the Leeds Permanent Building Society

The first recorded credit union in the United Kingdom was formed in Derry, Northern Ireland, in 1960. Inspired by the formation of the first credit unions in the Republic of Ireland, six individuals pooled their savings and formally established the Derry Credit Union.[4] In Great Britain, modern day credit unions emerged in the mid-1960s in London and Scotland. The first recorded British credit union was the Hornsey Co-operative, established 1964 in North London by Caribbean families, and is the foundation of what is now London Capital Credit Union.[5] Credit unions were popular in the Caribbean and large numbers of first generation Caribbean-British would become members of credit unions. By 1998, 38% of Caribbean British adults were members of credit unions.[6] In Scotland, several credit unions were established by immigrants from Ireland.[7] In Glasgow, credit union coverage and membership remains broad: one in six Glaswegians is member of a credit union, with nine employee credit unions and 25 community credit unions serving the city.[8] The Credit Unions Act 1979 for the first time regulated credit unions in the UK.[9] The Act required that all credit unions in Scotland, Wales and England register with the Registrar of Friendly Societies, who was responsible for ensuring that credit unions had a "satisfactory" common bond and adhered to common set of rules. The registrar was tasked with monitoring the activities of credit unions, who had to submit quarterly and annual returns to the registrar. The Act allowed the registrar to suspend a credit union's operations, strike credit unions off the registry and prosecute illegal financial activity by a credit union.[10] In the years immediately following the passing of the Act, the number of credit unions increased significantly. In 1982, 73 credit unions were registered. From the late 1980s to early 1990s the registration of credit unions surged, increasing fourfold between 1987 and 1994. Between 1994 and 2000 a large number of small credit unions closed or merged with other credit unions. In 2000, 660 credit unions were regarded officially registered. A further 220 credit unions had failed to submitted their annual return to the Registrar.[11] In 1980, the first credit union was registered in Wales. The St Therese's Credit Union served the Catholic community living on a housing estate in Port Talbot. In the 1990s membership of credit unions in Wales grew as credit unions helped to deliver anti-poverty and financial inclusion policies in cooperation with local authorities and national charities. By 1997, 31 credit unions were registered in Wales. Following mergers between smaller credit unions the number of registered credit unions in Wales reduced to 26 by 2010. Between them the 26 credit unions achieve all-Wales coverage.[12] According to Bank of England figures, the number of credit union members in Britain nearly doubled from 562,000 in 2004 to almost 1.04 million in 2012, while total assets increased from £432m to £956m. However, the number of active credit unions in Britain fell from 565 in 2004 to 390 in 2012. Some merged with rivals but others ceased trading, at least fourteen of them between January 2012 and July 2013