[MaxGhenis]

Fixes #2255

What was wrong

Pension Credit income added each income source as it stood, so a loss on one source reduced the claimant's other income. Main a3752304e, 2026-27, a single pensioner in Wales who owns outright:

Case	Pension Credit income	Pension Credit
Aged 75, £20,000 private pension	£18,514	£0
The same with a £30,000 property loss	£0	£12,376 (the full guarantee credit)
Aged 70, £10,000 wages	£10,000	£2,376
The same with an £8,000 self-employment loss	£2,000	£10,376

The law

• Earnings. Computation of Earnings Regulations 1996 reg. 13(12), which SPC Regulations 2002 reg. 17B(5)(b) applies to Pension Credit: "any loss incurred in any one of his employments shall not be offset against his earnings in any other of his employments".
• Other income. State Pension Credit Act 2002 ss. 15 to 16 and SPC Regulations 2002 regs. 15 to 18 say what counts as income. Nothing in them lets a loss or negative amount on one source be deducted from another.

Change

• pension_credit_income floors each person-level source at zero before adding it.
• pension_credit_earnings floors each person's wages and self-employment income at zero before adding them.

The rule is per employment. The model holds each person's employments as two variables, employment_income and self_employment_income, so the floor applies to those totals: a profitable trade already netted against another trade's loss inside self_employment_income cannot be recovered here.

Invariants (tested)

Tested for a single person aged 75 in Wales who owns outright, with amounts in the ranges the Hypothesis strategies draw (pension and wages £0 to £40,000, losses to −£100,000, property income −£100,000 to £20,000):

• A property loss gives the same Pension Credit income and award as no property income.
• A self-employment loss gives the same Pension Credit income and award as no self-employment income.
• Pension Credit with property income, positive or negative, is never higher than with none.

The tests fix age 75 on purpose. Under 75, an existing income tax defect (#2045) turns a self-employment loss into negative pension contributions relief, which raises income tax and so lowers Pension Credit income through its tax deduction. At age 70 with a £13,000 pension and an £8,000 loss, this branch gives Pension Credit income of £11,314 and an award of £1,062, against £12,914 and £0 without the loss: income tax is £1,686 instead of £86 because pension_contributions_relief is −£8,000 with no contributions. That is #2045, not the earnings rule, and is not changed here.

The third invariant is narrower than monotonicity on purpose. Between two positive property incomes the award can rise: the model taxes property income in full once it passes the £1,000 allowance, so at age 80 with a £13,000 pension the award is £318.62 at £1,000 of property income and £398.30 at £1,001. That is existing behaviour and not changed here.

Tests

• YAML, pension_credit_income.yaml: the property-loss reproducer, the same person without the loss, a positive property income (now asserting the income, £20,914), and the self-employment reproducer end to end.
• YAML, pension_credit_earnings.yaml: a loss beside wages, a loss alone, and a partner's loss beside the claimant's wages.
• Python, test_pension_credit_income_losses.py (Hypothesis): the three invariants over random amounts, and both reproducers. Each example runs its cases and their baselines in one simulation; the file takes about 25 seconds.
• Mutation.
  • With main's pension_credit_income restored, the reproducer test fails and one YAML case fails.
  • With main's pension_credit_earnings restored, the reproducer test and the self-employment property fail, and four YAML cases fail.

Local runs: Pension Credit YAML folder 208 passed; the Python file 4 passed; Ruff clean.

Impact

On the local enhanced FRS 2023-24 file, for 2026: Pension Credit falls from £0.888bn to £0.856bn (£32m, 3.6%), and benefit units receiving it from 269,200 to 267,300. All of it comes from the earnings change; the property change alone left the total at £0.888bn.

Not in this PR

• Whether rent counts at all. Reg. 15(5)(i) prescribes only rent from letting part of the claimant's own home, so rent from other property may not belong in Pension Credit income.
• Other programmes. The same unfloored property income is in the Housing Benefit, Income Support, tax credit and council tax reduction income lists.
• The property allowance step described above.
• Negative pension contributions relief under 75 (Pension contributions relief goes negative when a self-employment loss exceeds wages #2045), described above.
• PR Apply the Pension Credit earnings disregards (SPC Regs 2002 Sch VI) #2019 (Schedule VI earnings disregard) recomputes gross earnings by netting sources before flooring; see the note on that PR.

The first two are noted on #2255.

axiom: uksi/2002/1792/15 and uksi/2002/1792/17B TheAxiomFoundation/rulespec-uk#390 queued (rulespec-uk encodes only reg. 15(6) and takes claimant_income as an input; two extension comments add the no-netting rules, pasteable review_finding text and companion cases: other income and earnings)

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[MaxGhenis]

Merging on the gates.

• Head: cd2b2e8e, with main merged in at a3752304e.
• Checks: all green on this head, including Test.
• Mergeable: MERGEABLE, no change request. Marked ready from draft.
• Independent review: GPT-6.1 Sol, two rounds.
  • Round 1 approved the property-loss fix at 93daf9e9.
  • Round 2 approved this head, which adds the self-employment earnings rule (Computation of Earnings Regs 1996 reg. 13(12) via SPC Regs reg. 17B(5)(b)).
• Round 2 follow-ups:
  • The PR body now limits the tested invariants to the tested situation (age 75) and names Pension contributions relief goes negative when a self-employment loss exceeds wages #2045 as the cause of the under-75 counterexample.
  • The PR body notes that the per-employment rule is applied to the model's two earnings totals.
  • The composition gap with Apply the Pension Credit earnings disregards (SPC Regs 2002 Sch VI) #2019's gross earnings is posted on Apply the Pension Credit earnings disregards (SPC Regs 2002 Sch VI) #2019.
• Impact (local enhanced FRS 2023-24, 2026): Pension Credit −£32m (£0.888bn → £0.856bn), recipients 269,200 → 267,300. It is a bug fix to the cited regulations, so no approval threshold applies.

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