People are leaving government assistance untouched, statistics show.
The complexity of the tax credits system has led to many people failing to claim money back, the Times reports.
In particular, those on low incomes and in families were found to be missing out on "billions of pounds" of financial assistance, according to recent research. Figures from HM Revenue & Customs show that taxes were overpaid by around £1 billion in the most recent financial year alone.
The two main types of tax credit are the child tax credit, which is available to families with more than one child, and the working tax credit, on offer to everyone who earns below a certain amount. However, a study from charity Citizens Advice shows that 75 per cent of entitled Britons do not claim the working benefit, while eight per cent of parents do not take up the child tax assistance.
David Harker, of Citizens Advice, said: "Tax credits can play an essential part in family finances, but only if they provide a reliable source of income. For too many people the uncertainty, anxiety and hardship that claiming tax credits can cause outweighs the benefits of extra money."
Anita Monteith, of the Institute of Chartered Accountants in England and Wales, added: "A big problem with tax credits is a lack of financial literacy among those who are supposed to claim them. For many, the prospect of filling in complicated forms and being in regular contact with the Revenue is too daunting."
