Use each rule's own Universal Credit earned income in the benefit cap, targeted childcare and local CTR

changelog.d/1818.fixed.md

@@ -0,0 +1,4 @@
+- Benefit cap earnings exception (Universal Credit Regulations 2013 reg. 82) now deducts only the tax attributable to earnings, rather than the claimant's whole income tax liability, so property, savings, dividend and pension income no longer erode net earnings and wrongly remove the exception. Relievable pension contributions are now deducted as reg. 55(5) requires.
+- Moved the benefit cap earnings threshold out of three hardcoded copies of `10_152` into the dated parameter `gov.dwp.benefit_cap_earnings_exemption`, with values from 2020-21 to 2026-27 (2026-27 rises to £881 a month) derived from 16 hours a week at the National Living Wage.
+- Armed Forces Independence Payment now excepts a benefit unit from the benefit cap, as GOV.UK and the regulations provide. The variable has no dataset source, so this changes household calculations only.
+- Removed dead copy-pasted code from the three `is_benefit_cap_exempt_*` variables, which computed exemption conditions that were never returned.

changelog.d/1986.fixed.md

@@ -0,0 +1 @@
+- Use Universal Credit earned income as each rule defines it (#1986): the benefit cap earnings exception sums each claimant's earnings net of their own income tax and National Insurance on those earnings and their relievable pension contributions, without minimum income floor income (UC Regs 2013 reg. 82), and does not except a Housing Benefit award without Universal Credit; its threshold parameter now also covers £430 a month before April 2017 and 2017-18 to 2019-20; the targeted childcare Universal Credit route and the Kingston upon Thames, Merton, Newham and Westminster council tax reduction schemes count earned income before the work allowance.

docs/book/programs/gov/dfe/targeted-childcare-entitlement.ipynb

@@ -28,7 +28,7 @@
     "\n",
     "#### Eligibility conditions\n",
     "Families may also qualify based on income thresholds if they receive:\n",
-    "* **Universal Credit** with household earned income of **£15,400 or less** per year\n",
+    "* **Universal Credit** with earned income of **£15,400 or less** per year (combined for a couple), as Universal Credit calculates it: earnings after the person's own tax, National Insurance and pension contributions, and before the work allowance (`uc_earned_income_before_work_allowance`)\n",
     "* **Tax Credits** (Working Tax Credit or Child Tax Credit) with household income of **£16,190 or less** per year\n",
     "\n",
     "#### Geographic scope\n",

docs/book/programs/gov/dwp/universal-credit.ipynb

@@ -46,6 +46,11 @@
    "metadata": {},
    "source": "## How PolicyEngine computes Universal Credit\n\nPolicyEngine computes Universal Credit at the benefit-unit level in three stages:\n\n1. **Maximum entitlement** (`uc_maximum_amount`): sum the elements the benunit qualifies for — `uc_standard_allowance`, `uc_child_element`, `uc_disability_elements`, `uc_carer_element`, `uc_housing_costs_element`, and `uc_childcare_element`.\n2. **Means test**: only the claimants' income counts: the single claimant, or the two joint claimants (`is_uc_assessed_claimant`; UC Regulations 2013 reg 22(1)). The earnings and unearned income of a child, a qualifying young person or anyone else in the benefit unit are theirs, not the claimant's, so the Universal Credit means test does not count them. Who the claimants are comes from `is_uc_claimant` (the claimant and partner); a member flagged there is taken as a claimant whatever their age. Each person's earnings (`uc_individual_earned_income`) are net of their own relievable pension contributions and the income tax and National Insurance they pay on that employment or self-employment (UC Regulations 2013 regs 55(5) and 57(2)): `uc_income_tax_on_earnings` treats earnings as the lowest slice of the person's non-savings income, so tax on pensions, property, savings and dividends is never deducted, and one partner's tax never reduces the other's earnings. A claimant in gainful self-employment outside a start-up period who would otherwise be subject to all work-related requirements is subject to the minimum income floor (reg 62): when their earnings after those deductions are below `uc_minimum_income_floor`, they are treated as having that amount instead. The floor does not apply to a claimant in the no work-related requirements, work-focused interview or work preparation group (`uc_work_related_group_apart_from_earnings`; Welfare Reform Act 2012 ss 19 to 21): for example one with limited capability for work-related activity, a carer, a claimant over State Pension Credit qualifying age, or the responsible carer of a child under 3. Only one member of a couple is the responsible carer (`uc_is_responsible_carer`); where the nomination is not supplied the model takes the claimant who works fewer hours (`hours_worked`), then the elder. `hours_worked` defaults to 0, so for a couple entered without hours the default falls to the elder; supply `uc_is_responsible_carer` where the nomination is known. The floor is the minimum wage for their age for their expected hours (`uc_expected_hours`: 35 a week, or for the responsible carer of a child under 13 the hours DWP uses: 30 from February 2025, from April 2017 until then 16 for a child under compulsory school age and 25 for an older child, and 25 for any child under 13 before April 2017; regs 88 and 90(2)), less the income tax and the Class 2 and Class 4 National Insurance a self-employed person would pay on it (reg 62(4)(b) leaves this amount to the Secretary of State; this is the basis of DWP's guidance and figures, and setting the `gov.dwp.universal_credit.means_test.minimum_income_floor.self_employed_national_insurance` parameter to false deducts primary Class 1 instead). A member of a couple is lifted only while the couple's combined earnings are below the couple threshold, and never above it (reg 62(3)). The couple threshold is the sum of both partners' thresholds (reg 90(3)): 16 hours for a partner in the work-focused interview or work preparation group, nothing for a partner with no work-related requirements for a reason other than earnings, and 35 hours at the national living wage (the adult rate before April 2016) for a partner who cannot be a joint claimant (reg 90(3)(b)). The maximum entitlement is then reduced by 55% (the `gov.dwp.universal_credit.means_test.reduction_rate` parameter) of the claimants' combined earnings above the work allowance (`uc_work_allowance`), and by all of the claimants' unearned income (`uc_unearned_income`), pound for pound. Unearned income is the list in `gov.dwp.universal_credit.means_test.income_definitions.unearned`: retirement pension income (State Pension and private pensions, UC Regulations 2013 regs 66(1)(a) and 67), Carer's Allowance, carer support payment (up to the Carer's Allowance rate, from November 2023), contribution-based JSA and ESA, maternity allowance, industrial injuries benefit, and the tariff income deemed from capital (reg 72). Actual savings interest, dividends and ordinary rental income are excluded from UC unearned income at every capital level; capital counts through its tariff income instead. Asset rules apply on top of this — capital above the lower threshold deems a tariff income, and capital above the upper threshold disqualifies the benunit entirely.\n3. **Benefit cap**: the post-means-test award (`universal_credit_pre_benefit_cap`) is finally reduced by `benefit_cap_reduction` to produce `universal_credit`. The benefit cap only applies to benunits without a benefit-cap exemption (the claimants earning enough, having a qualifying disability benefit, etc.). The earnings exception reads the claimants' earnings only (reg 82(1)(a)), the capped total counts only the claimants' own contributory benefits (WRA 2012 s.96(1)), and the childcare work condition tests only the claimants (reg 32(1)).\n\nThe take-up step is handled by the input variable `would_claim_uc`, which is populated stochastically when the dataset is built so that PolicyEngine's caseload aggregates match published DWP claimant numbers rather than the full eligible population.\n\nParameters live in `policyengine_uk/parameters/gov/dwp/universal_credit/` and the per-element formulas in `policyengine_uk/variables/gov/dwp/universal_credit/`."
   },
+  {
+   "cell_type": "markdown",
+   "metadata": {},
+   "source": "### Benefit cap earnings exception\n\nThe cap does not apply to a Universal Credit award where the claimant's earned income, or a couple's combined earned income, reaches 16 hours a week at the national living wage, converted to a monthly amount by multiplying by 52 and dividing by 12, with any fraction of a pound disregarded (UC Regulations 2013 regs 82(1)(a) and 6(1A)(za)): £846 a month in 2025-26 and £881 in 2026-27 (`gov.dwp.benefit_cap_earnings_exemption`). Before 1 April 2017 it was £430 a month. Earned income here (`benefit_cap_earned_income`) is each claimant's earnings net of their own income tax and National Insurance on those earnings and their relievable pension contributions, and leaves out income treated as earned under the minimum income floor (reg 82(4)). Reg 82 excepts only an award of Universal Credit, so the exception does not lift the cap on a Housing Benefit award without Universal Credit; Housing Benefit's own work exception is entitlement to Working Tax Credit (HB Regulations 2006 reg 75E). The nine-month grace period is not modelled."
+  },
   {
    "cell_type": "code",
    "execution_count": 15,

policyengine_uk/parameters/gov/dwp/benefit_cap_earnings_exemption.yaml

@@ -0,0 +1,46 @@
+description: Monthly earned income at or above which a Universal Credit claimant (or couple, jointly) is excepted from the benefit cap. Set by regulation 82 of the Universal Credit Regulations 2013, from 1 April 2017 as 16 hours per week at the National Living Wage rate in regulation 4 of the National Minimum Wage Regulations 2015, converted to a monthly amount by multiplying by 52 and dividing by 12, with any fraction of a pound disregarded (regulation 6(1A)(za)), and before then as 430. Earned income for this test is net of income tax, National Insurance contributions and relievable pension contributions on the earnings, and excludes income treated as earned under the minimum income floor.
+values:
+  2013-04-29:
+    value: 430
+    reference:
+      - title: The Universal Credit Regulations 2013 reg. 82(1)(a) as made ("equal to or exceeds £430"); in force 29 April 2013 (reg. 1)
+        href: https://www.legislation.gov.uk/uksi/2013/376/regulation/82/made
+  2017-04-01:
+    value: 520
+    reference:
+      - title: The Universal Credit (Benefit Cap Earnings Exception) Amendment Regulations 2017 (S.I. 2017/138) reg. 2(3)(a), in force 1 April 2017; National Minimum Wage Regulations 2015 reg. 4 at 1 April 2017, £7.50; 7.50 x 16 x 52 / 12 = 520
+        href: https://www.legislation.gov.uk/uksi/2017/138/made
+      - title: The National Minimum Wage Regulations 2015 reg. 4 (1 April 2017)
+        href: https://www.legislation.gov.uk/uksi/2015/621/regulation/4/2017-04-01
+  2018-04-01:
+    value: 542
+    reference:
+      - title: The National Minimum Wage Regulations 2015 reg. 4 at 1 April 2018, £7.83; 7.83 x 16 x 52 / 12 = 542.88, fraction disregarded (UC Regs 2013 reg. 6(1A)(za))
+        href: https://www.legislation.gov.uk/uksi/2015/621/regulation/4/2018-04-01
+  2019-04-01:
+    value: 569
+    reference:
+      - title: The National Minimum Wage Regulations 2015 reg. 4 at 1 April 2019, £8.21; 8.21 x 16 x 52 / 12 = 569.23, fraction disregarded (UC Regs 2013 reg. 6(1A)(za))
+        href: https://www.legislation.gov.uk/uksi/2015/621/regulation/4/2019-04-01
+  2020-04-01: 604
+  2021-04-01: 617
+  2022-04-01: 658
+  2023-04-01: 722
+  2024-04-01: 793
+  2025-04-01: 846
+  2026-04-01: 881
+metadata:
+  label: Benefit cap earnings exemption threshold
+  unit: currency-GBP
+  period: month
+  reference:
+    - title: The Universal Credit Regulations 2013 reg. 82 (Exceptions - earnings)
+      href: https://www.legislation.gov.uk/uksi/2013/376/regulation/82
+    - title: The Universal Credit Regulations 2013 reg. 6(1A)(za) (Rounding)
+      href: https://www.legislation.gov.uk/uksi/2013/376/regulation/6
+    - title: The Universal Credit Regulations 2013 reg. 55 (Employed earnings)
+      href: https://www.legislation.gov.uk/uksi/2013/376/regulation/55
+    - title: GOV.UK - Benefit cap - When you're not affected
+      href: https://www.gov.uk/benefit-cap/when-youre-not-affected
+    - title: GOV.UK - National Minimum Wage and National Living Wage rates
+      href: https://www.gov.uk/national-minimum-wage-rates

policyengine_uk/tests/policy/baseline/finance/benefit/family/universal_credit/claims_as_single_person.yaml

@@ -707,8 +707,8 @@
     # "Couple" in the cap includes a single claimant's partner (reg. 78(2)).
     # 11,000 a year (916.67 a month) exceeds 16 hours at the national living
     # wage of 12.71 (NMW Regs 2015 reg. 4 from 1 April 2026):
-    # 12.71 x 16 x 52 / 12 = 881.23 a month. The model uses a fixed
-    # 10,152 a year; 11,000 clears both.
+    # 12.71 x 16 x 52 / 12 = 881.23 a month, 881 in whole pounds (reg.
+    # 6(1A)(za); gov.dwp.benefit_cap_earnings_exemption).
     is_benefit_cap_exempt_earnings: true
 
 - name: Sch 4 para 28(2) - a renter under 35 claiming as a single person is a specified renter, whatever the partner's age