Charge the winter fuel payment back through income tax, person by person

changelog.d/2066-aggregate-reader-precision.fixed.md

@@ -0,0 +1 @@
+- Fixed aggregate counted-once checks falsely identifying unchanged large tax heads as containing a component read through a declared dependency.

changelog.d/winter-fuel-payment-charge-fiscal-reads.fixed.md

@@ -0,0 +1 @@
+- Correct fiscal-partition eligibility reads for income tax and the TV licence after separating the Winter Fuel Payment charge from tax deducted by Pension Credit.

changelog.d/winter-fuel-payment-charge.added.md

@@ -0,0 +1,3 @@
+- Add the winter fuel payment charge (`winter_fuel_payment_charge`, ITEPA 2003 s.681I, from 2025-26) with parameters under `gov.hmrc.income_tax.charges.winter_fuel_payment`. It is charged person by person: the whole Winter Fuel Payment (England, Wales and Northern Ireland) or Pension Age Winter Heating Payment, when the person's own total income (ITA 2007 s.23 Step 1) exceeds £35,000 and they are not entitled to Income Support, income-based JSA, Pension Credit, income-related ESA or Universal Credit. It is added to `income_tax` after tax reductions (ITA 2007 s.23 Step 7).
+- Add `income_tax_before_winter_fuel_payment_charge`. The Pension Credit means test, including the income tax it attributes to employed and self-employed earnings (SPC Regs 2002 reg. 17(10) and (11)), and the Income Support, Housing Benefit (applicable income and net earnings) and Council Tax Reduction means tests now deduct it instead of `income_tax`. The charge recovers a payment rather than taxing the income those tests assess, and it depends on Pension Credit and Universal Credit receipt, so deducting it would make the model circular. Universal Credit earned income and the benefit cap's earnings test already deduct only each person's own tax on earnings, which leaves out the charge. The property allowance election still compares `income_tax`, which now includes the charge: a route can change total income and Pension Credit, and so whether the charge applies. Landlords decide one per household rather than one per benefit unit, because a couple's Pension Credit can change another benefit unit's shared payment and so its charge. Landlords without finance costs still take the allowance without comparing, as before; that can rarely cost more once the charge applies (when the lower tax ends Pension Credit and with it the exemption), but comparing for them made simulations several times slower.
+- Add `total_income_charged_to_tax`, total income as ITA 2007 s.23 Step 1 defines it: the model's taxable income components (after employment expenses, capital allowances, the trading and property allowances and exempt ISA interest), less employee pension contributions relieved under a net pay arrangement (`net_pay_pension_relief`, new: FA 2004 s.193(2) deducts them from employment income, so up to taxable employment income, statutory sick, maternity and paternity pay included, and none from age 75), with losses brought forward added back. The winter fuel payment charge tests it, and `adjusted_total_income` now reads it for Step 1 instead of computing it itself, deducting at Steps 3 and 4 only the relieved contributions not already deducted, so its values are unchanged up to float32 rounding. `total_income` still sums gross income.

changelog.d/winter-fuel-payment-charge.changed.md

@@ -0,0 +1 @@
+- Deprecate `gov.dwp.winter_fuel_payment.eligibility.taxable_income_test`: it is off in every year and has effect only in a reform that both switches it on and requires a relevant benefit. Its limit now admits total income equal to it. Use `gov.hmrc.income_tax.charges.winter_fuel_payment` for the charge.

changelog.d/winter-fuel-payment-charge.fixed.md

@@ -0,0 +1 @@
+- From the 2025 qualifying week, pay the Winter Fuel Payment to everyone of pensionable age in England, Wales and Northern Ireland who meets its other conditions (SI 2025/969 reg. 2; NISR 2025/142 reg. 2) and recover it through the winter fuel payment charge, in place of a household income test. The test paid a whole household if any member of pensionable age had total income under £35,000. It applied only in England and Wales, so pensioners in Northern Ireland not on a relevant benefit were paid nothing, and nothing stood in for the charge on the Pension Age Winter Heating Payment. Its boundary was also wrong: total income of exactly £35,000 is not charged.

policyengine_uk/data/fiscal_partition.yaml

@@ -167,6 +167,10 @@ tax_heads:
     payer: household
     totals: [gov_tax, household_tax, pre_budget_change_household_tax]
     sign: nonnegative
+    reads:
+      - head: nics_individual
+        route: income_tax -> winter_fuel_payment_charge -> is_on_pension_credit -> pension_credit -> pension_credit_income -> national_insurance
+        why: Pension Credit receipt exempts a person from the charge, and its means test deducts National Insurance
   - id: nics_individual
     label: National Insurance (employee and self-employed)
     variable: national_insurance
@@ -375,12 +379,9 @@ tax_heads:
     totals: [gov_tax, household_tax, pre_budget_change_household_tax]
     sign: nonnegative
     reads:
-      - head: income_tax
-        route: tv_licence -> tv_licence_discount -> pension_credit -> pension_credit_income -> income_tax
-        why: the over-75 discount depends on Pension Credit receipt, a means test on net income
       - head: nics_individual
         route: tv_licence -> tv_licence_discount -> pension_credit -> pension_credit_income -> national_insurance
-        why: as above
+        why: the over-75 discount depends on Pension Credit receipt, a means test on net income
 
   # Property
   - id: council_tax

policyengine_uk/parameters/gov/dwp/winter_fuel_payment/eligibility/require_benefits.yaml

@@ -1,19 +1,28 @@
-description: Whether a relevant benefit is a condition of the Winter Fuel Payment. It was for the 2024 qualifying week. From the 2025 qualifying week the regulations pay everyone of pensionable age, and the winter fuel payment charge (ITEPA 2003 s.681I) recovers the payment from people with total income over £35,000 who are not on a relevant benefit. The model keeps this true from 2025 and lets people who are not on a relevant benefit through the income test in taxable_income_test, which stands in for the charge.
+description: Whether a relevant benefit is a condition of the Winter Fuel Payment. It was for the 2024 qualifying week only. Up to the 2023 week, and from the 2025 week, everyone of pensionable age resident where the payment is made is entitled; from 2025-26 the winter fuel payment charge (gov.hmrc.income_tax.charges.winter_fuel_payment) recovers the payment from people with total income over £35,000 who are not on a relevant benefit.
 values:
-  2000-01-01: false
+  2000-01-01:
+    value: false
+    reference:
+      - title: The Social Fund Winter Fuel Payment Regulations 2000, reg. 2 (as in force for the 2023 qualifying week)
+        href: https://www.legislation.gov.uk/uksi/2000/729/regulation/2/2023-09-18
+  # Dated 1 January so that the year's value is the one for its September
+  # qualifying week; SI 2024/869 came into force on 16 September 2024.
   2024-01-01:
     value: true
-    metadata:
-      reference:
-      - title: The Social Fund Winter Fuel Payment Regulations 2024 regulation 2
-        href: https://www.legislation.gov.uk/uksi/2024/869/regulation/2
+    reference:
+      - title: The Social Fund Winter Fuel Payment Regulations 2024, reg. 2(2)(b)
+        href: https://www.legislation.gov.uk/uksi/2024/869/regulation/2/made
+      - title: The Social Fund Winter Fuel Payment Regulations (Northern Ireland) 2024, reg. 2(2)(b)
+        href: https://www.legislation.gov.uk/nisr/2024/160/regulation/2/made
+  # SI 2025/969 came into force on 15 September 2025, the first day of the
+  # 2025 qualifying week.
+  2025-01-01:
+    value: false
+    reference:
+      - title: The Social Fund Winter Fuel Payment Regulations 2025, reg. 2
+        href: https://www.legislation.gov.uk/uksi/2025/969/regulation/2/made
+      - title: The Social Fund Winter Fuel Payment Regulations (Northern Ireland) 2025, reg. 2
+        href: https://www.legislation.gov.uk/nisr/2025/142/regulation/2
 metadata:
   unit: bool
   label: Winter Fuel Payment means-tested benefits requirement
-  reference:
-    - href: https://www.legislation.gov.uk/uksi/2000/729/regulation/2
-      title: The Social Fund Winter Fuel Payment Regulations 2000
-    - title: The Social Fund Winter Fuel Payment Regulations 2025, reg. 2
-      href: https://www.legislation.gov.uk/uksi/2025/969/regulation/2/made
-    - title: Finance Act 2026, Sch. 10 (ITEPA 2003 s.681I, winter fuel payment charge)
-      href: https://www.legislation.gov.uk/ukpga/2026/11/schedule/10

policyengine_uk/parameters/gov/dwp/winter_fuel_payment/eligibility/taxable_income_test/maximum_taxable_income.yaml

@@ -1,11 +1,11 @@
-description: Households in England or Wales with a pensioner whose total income is at or below this amount are eligible for the Winter Fuel Payment. This stands in for the winter fuel payment charge, which recovers the payment from a person whose own total income exceeds £35,000 and who is not entitled to a relevant benefit.
+description: Deprecated; use gov.hmrc.income_tax.charges.winter_fuel_payment.income_threshold for the winter fuel payment charge. The household income test (use_maximum_taxable_income) pays a person not on a relevant benefit if a member of their household who has reached pensionable age has total income at or under this amount. It has effect only when that test is switched on and a relevant benefit is required (require_benefits).
 values:
   2000-01-01: 0
   2025-01-01:
     value: 35_000
     reference:
-      - title: Finance Act 2026, Sch. 10 para. 1 (ITEPA 2003 s.681I(1)(b), for 2025-26 on)
+      - title: Finance Act 2026, Sch. 10 para. 1 (ITEPA 2003 s.681I(1)(b), the charge's threshold, which this test stood in for)
         href: https://www.legislation.gov.uk/ukpga/2026/11/schedule/10
 metadata:
   unit: currency-GBP
-  label: Winter Fuel Payment maximum taxable income
+  label: Winter Fuel Payment household income test limit (deprecated)

policyengine_uk/parameters/gov/dwp/winter_fuel_payment/eligibility/taxable_income_test/use_maximum_taxable_income.yaml

@@ -1,10 +1,6 @@
-description: When this is true, households in England or Wales with a pensioner whose total income is at or below the maximum taxable income are eligible for the Winter Fuel Payment. This stands in for the winter fuel payment charge on people with total income over £35,000 (ITEPA 2003 s.681I, from 2025-26).
+description: Deprecated; use gov.hmrc.income_tax.charges.winter_fuel_payment for the winter fuel payment charge. When this is true and a relevant benefit is required (require_benefits), a person who is not on one is still paid if a member of their household who has reached pensionable age has total income at or under maximum_taxable_income. No regulations have set such a test. It stood in for the winter fuel payment charge for 2025 before the model computed the charge, and is kept, off, so that reforms which set it still load. It has no effect while require_benefits is false, as it is from 2025.
 values:
   2000-01-01: false
-  2025-01-01: true
 metadata:
   unit: bool
-  label: WFA maximum taxable income eligibility
-  reference:
-    - title: Finance Act 2026, Sch. 10 para. 1 (ITEPA 2003 s.681I)
-      href: https://www.legislation.gov.uk/ukpga/2026/11/schedule/10
+  label: Winter Fuel Payment household income test (deprecated)

policyengine_uk/parameters/gov/hmrc/income_tax/charges/winter_fuel_payment/README.md

@@ -0,0 +1 @@
+# Winter fuel payment charge

policyengine_uk/parameters/gov/hmrc/income_tax/charges/winter_fuel_payment/in_effect.yaml

@@ -0,0 +1,14 @@
+description: Whether the winter fuel payment charge applies. It has effect for the tax year 2025-26 and later tax years.
+values:
+  2000-01-01: false
+  # Dated 1 January so that the year's value is the one for the tax year
+  # beginning in its April (2025 = 2025-26), whose qualifying week is in
+  # September 2025.
+  2025-01-01:
+    value: true
+    reference:
+      - title: Finance Act 2026, Sch. 10 para. 5 (commencement)
+        href: https://www.legislation.gov.uk/ukpga/2026/11/schedule/10
+metadata:
+  unit: bool
+  label: Winter fuel payment charge in effect

policyengine_uk/parameters/gov/hmrc/income_tax/charges/winter_fuel_payment/income_threshold.yaml

@@ -0,0 +1,13 @@
+description: A person entitled to a winter fuel payment is liable to the winter fuel payment charge when their total income for the tax year exceeds this amount, unless they are entitled to a relevant benefit in the qualifying week. Total income of exactly this amount is not charged. The Treasury may change the amount by order for later tax years.
+values:
+  2025-01-01:
+    value: 35_000
+    reference:
+      - title: Income Tax (Earnings and Pensions) Act 2003, s. 681I(1)(b), inserted by Finance Act 2026, Sch. 10 para. 1
+        href: https://www.legislation.gov.uk/ukpga/2003/1/section/681I
+      - title: Income Tax (Earnings and Pensions) Act 2003, s. 681J (alteration of income limit by Treasury order)
+        href: https://www.legislation.gov.uk/ukpga/2003/1/section/681J
+metadata:
+  unit: currency-GBP
+  period: year
+  label: Winter fuel payment charge income threshold

policyengine_uk/parameters/gov/hmrc/income_tax/charges/winter_fuel_payment/relevant_benefits.yaml

@@ -0,0 +1,15 @@
+description: Benefits that exempt a person from the winter fuel payment charge when they are entitled to one on any day in the qualifying week. The model takes a person to be entitled when an award is paid to them in the year. A couple's Income Support, income-based jobseeker's allowance, income-related employment and support allowance or Pension Credit is the claimant's, the member it is paid to, and not the partner's. Joint claimants of Universal Credit are both entitled.
+values:
+  2025-01-01:
+    value:
+      - is_on_income_support
+      - is_on_income_based_jsa
+      - is_on_pension_credit
+      - is_on_income_related_esa
+      - is_on_universal_credit
+    reference:
+      - title: Income Tax (Earnings and Pensions) Act 2003, s. 681I(4) and (5)
+        href: https://www.legislation.gov.uk/ukpga/2003/1/section/681I
+metadata:
+  unit: list
+  label: Winter fuel payment charge relevant benefits

policyengine_uk/programs.yaml

@@ -15,7 +15,7 @@ programs:
     variable: income_tax
     parameter_prefix: gov.hmrc.income_tax
     verified_start_year: 2019
-    notes: Includes Scottish rates via devolved tax bands
+    notes: Includes Scottish rates via devolved tax bands, the high income child benefit charge and, from 2025-26, the winter fuel payment charge
 
   - id: national_insurance
     name: National Insurance
@@ -369,7 +369,7 @@ programs:
     variable: winter_fuel_payment
     parameter_prefix: gov.dwp.winter_fuel_payment
     verified_start_year: 2022
-    notes: Great Britain to winter 2023-24, then England and Wales; Northern Ireland's mirror scheme uses the same parameters
+    notes: Great Britain to winter 2023-24, then England and Wales; Northern Ireland's mirror scheme uses the same parameters. From winter 2025-26 paid to everyone of pensionable age and recovered by the winter fuel payment charge (income tax)
 
   - id: ssmg
     name: Sure Start Maternity Grant
@@ -609,4 +609,4 @@ programs:
     variable: pension_age_winter_heating_payment
     parameter_prefix: gov.social_security_scotland.pawhp
     verified_start_year: 2024
-    notes: Replaced the Winter Fuel Payment in Scotland from winter 2024-25
+    notes: Replaced the Winter Fuel Payment in Scotland from winter 2024-25. From winter 2025-26 recovered by the winter fuel payment charge (income tax) above £35,000 of total income

policyengine_uk/tests/aggregate_impact/test_aggregate_impact_guard.py

@@ -11,7 +11,14 @@
 from hypothesis import given, settings
 from hypothesis import strategies as st
 
-from policyengine_uk.utils.aggregate_impact.guard import counted_once, snapshot_inputs
+from policyengine_uk.utils.aggregate_impact.guard import (
+    _slack,
+    breaks_on_slope,
+    counted_once,
+    judge_total,
+    snapshot_inputs,
+    still_breaks,
+)
 from policyengine_uk.utils.aggregate_impact.partition import parse_partition
 
 YEAR = 2026
@@ -232,6 +239,110 @@ def test_a_declared_read_may_respond_but_not_one_for_one():
     assert row["status"] == "fail" and ("tax_a", "contains") in kinds(row)
 
 
+@pytest.mark.parametrize("tax_level", [100_000, 300_000])
+@pytest.mark.parametrize("declared", [False, True])
+@pytest.mark.parametrize("contains", [False, True])
+def test_a_large_tax_head_is_containment_only_when_it_responds_one_for_one(
+    tax_level, declared, contains
+):
+    """A flat £300,000 reader is unchanged at both NI-style perturbations."""
+    formulas = model(contains=False)
+    formulas["tax_a"] = lambda f: tax_level + contains * f("tax_b")
+    reads = {"tax_a": ["tax_b"]} if declared else {}
+    _, result = run(formulas, partition(["tax_a", "tax_b"], reads=reads))
+    row = by_variable(result)["tax_b"]
+    assert row["status"] == ("fail" if contains else "pass")
+    if contains:
+        assert ("tax_a", "contains" if declared else "moves") in kinds(row)
+    else:
+        assert "tax_a" not in row["responses"]["gov_tax"]
+    assert result["reset_reproduces_baseline"]
+
+
+def test_a_large_reader_with_a_mediated_slope_has_no_held_containment():
+    """Both held measurements are flat after the other head stops moving."""
+    formulas = model(contains=False)
+    formulas["tax_c"] = lambda f: 0.5 * f("tax_b")
+    formulas["tax_a"] = lambda f: 300_000 + 2 * f("tax_c")
+    formulas["gov_tax"] = lambda f: f("tax_a") + f("tax_b") + f("tax_c")
+    _, result = run(
+        formulas,
+        partition(
+            ["tax_a", "tax_b", "tax_c"],
+            reads={"tax_a": ["tax_b", "tax_c"], "tax_c": ["tax_b"]},
+        ),
+    )
+    row = by_variable(result)["tax_b"]
+    assert row["status"] == "pass"
+    assert [(m["head"], m["kind"], m["via"]) for m in row["mediated"]] == [
+        ("tax_a", "contains", ["tax_c"])
+    ]
+    assert result["reset_reproduces_baseline"]
+
+
+def test_a_large_reader_contains_a_component_despite_an_extra_mediated_slope():
+    """The unrestricted slope is 1.125; holding tax_c reveals containment."""
+    formulas = model(contains=False)
+    formulas["tax_c"] = lambda f: 0.25 * f("tax_b")
+    formulas["tax_a"] = lambda f: 300_000 + f("tax_b") + 0.5 * f("tax_c")
+    formulas["gov_tax"] = lambda f: f("tax_a") + f("tax_b") + f("tax_c")
+    _, result = run(
+        formulas,
+        partition(
+            ["tax_a", "tax_b", "tax_c"],
+            reads={"tax_a": ["tax_b", "tax_c"], "tax_c": ["tax_b"]},
+        ),
+    )
+    row = by_variable(result)["tax_b"]
+    assert row["status"] == "fail"
+    assert ("tax_a", "contains") in kinds(row)
+    assert result["reset_reproduces_baseline"]
+
+
+@pytest.mark.parametrize("contains", [False, True])
+@settings(max_examples=60, deadline=None)
+@given(
+    tax_level=st.floats(0, 1e9),
+    perturbation=st.floats(1e-6, 1e6),
+)
+def test_containment_depends_on_the_response_and_perturbation_not_the_tax_level(
+    contains, tax_level, perturbation
+):
+    """Zero never contains; a one-for-one response always does, at any size."""
+    expected = np.array([perturbation])
+    first = expected if contains else np.zeros(1)
+    second = 2 * first
+    scales = np.array([tax_level])
+    where = np.array([True])
+    for second_changes in (None, {"tax_a": second}):
+        verdict = judge_total(
+            total="gov_tax",
+            is_tax=True,
+            component="tax_b",
+            own_variable="tax_b",
+            declared_double_count=False,
+            zero_baseline=False,
+            weights=np.ones(1),
+            expected=expected,
+            head_changes={"tax_b": expected, "tax_a": first},
+            head_scales={"tax_b": scales, "tax_a": scales},
+            model_change=None,
+            model_scale=None,
+            allowed_readers=["tax_a"],
+            second_changes=second_changes,
+        )
+        assert bool(verdict["problems"]) == contains
+        if contains:
+            assert verdict["problems"][0]["head"] == "tax_a"
+            assert verdict["problems"][0]["kind"] == "contains"
+    slack = _slack(scales)
+    for held_second in (None, second):
+        direct = still_breaks("contains", where, expected, slack, first, held_second)
+        assert bool(direct[0]) == contains
+    at_first = breaks_on_slope("contains", where, expected, slack, second - first)
+    assert bool(at_first[0]) == contains
+
+
 def test_supplied_inputs_are_restored_after_perturbation():
     formulas = model(contains=False)
     formulas.pop("tax_b")