Working Tax Credit (WTC) and Child Tax Credit (CTC) were introduced in 2003/04, so they are entering their fourth year. The rates of WTC and CTC for 2006/07 have been in many cases increased in line with inflation, but some elements have not (e.g. the amount of childcare cost that the Revenue will cover becomes 80% of £300pw for two children, while the basic family element remains £545).

The most important change relates to the rule for clawing back credits where someone's income goes up. This has caused substantial hardship, because many people have not realised that their claim is provisional based on last year's income and will be reduced or withdrawn if their current year income turns out to be higher. For 2006/07, an increase of £25,000 will be ignored, against the previous level of £2,500. This should make a clawback for income increases very unlikely.