Tax credits are state benefits that provide extra money to people responsible for children, disabled workers and other workers on lower incomes. There are two types of tax credits – child tax credits and working tax credits.

Tax credits are means-tested. So, whether you qualify and how much you get depends on your household’s income and circumstances.

How much tax credit you get is initially based on your current circumstances and your income during the previous tax year.

So, people applying in 2015/16 for the first time will use their current family circumstance, but the income they received last year – between 6 April 2014 and 5 April 2015.

Sole traders are particularly vulnerable to fluctuations in income and the risk of overpayment. If your income has fallen since last year, you can ask Her Majesty’s Revenue and Customs (HMRC) to revise your award based on your estimated current year income.

However, be careful not to overestimate the fall in your income otherwise you may be overpaid tax credits which you’ll have to pay back at the end of the year. You have to repay any tax credits to which you are not entitled, and this is strictly enforced.

You must report any change in your circumstances and income. Be careful not to make mistakes on your form as this can have serious consequences, and make sure you renew your tax credits in good time.

Seek help if you are struggling with the process or forms. In the first instance, visit https://www.gov.uk/browse/benefits/tax-credits