Fix Scottish top-rate taxable income threshold

changelog.d/2130.fixed.md

@@ -0,0 +1 @@
+- Corrected the Scottish 48% top-rate threshold to £125,140 of taxable income for 2024–25, 2025–26 and 2026–27, accounting for the fully withdrawn personal allowance.

docs/engineering/gift-aid.md

@@ -13,6 +13,15 @@ non-savings income, it also increases the Scottish basic-rate upper limit and
 every limit above it; the starter-rate upper limit remains unchanged. Savings
 and dividends use the extended UK limits for Scottish taxpayers too.
 
+The Scottish top-rate limit is £125,140 of taxable income in each of
+[2024-25](https://www.parliament.scot/chamber-and-committees/votes-and-motions/S6M-12252),
+[2025-26](https://www.parliament.scot/chamber-and-committees/votes-and-motions/S6M-16531)
+and [2026-27](https://www.parliament.scot/chamber-and-committees/votes-and-motions/S6M-20844).
+The personal allowance is fully withdrawn at that income, so £12,570 is not
+subtracted from this limit, as the [Scottish Government's explanatory
+note](https://www.gov.scot/publications/scottish-rate-resolution-2026-2027-draft-motion-explanatory-note/pages/3/)
+explains. Gift Aid extends this taxable-income limit by the gross gift.
+
 The model extends limits where band amounts are calculated. For variables that
 use a complete rate scale, `calc_income_tax_with_gift_aid` in
 `policyengine_uk/utils/income_tax.py` applies an equivalent correction to the
@@ -53,14 +62,8 @@ including s. 12B(8) for Scottish taxpayers, with s. 414(2)(b)).
 
 ## Existing limitations
 
-Zero-gift calculations retain their existing behavior. Several inherited
-limitations remain relevant when interpreting mixed-income results:
+Several limitations remain relevant when interpreting mixed-income results:
 
-- The Scottish top-rate threshold parameter is £112,570 of income after
-  allowances for 2024 onwards. The [HMRC rates and allowances
-  table](https://www.gov.uk/government/publications/rates-and-allowances-income-tax/income-tax-rates-and-allowances-current-and-past)
-  gives £125,140 after allowances. The Gift Aid correction extends the model's
-  existing threshold and does not repair it.
 - Adjusted net income still omits other adjustments in s. 58, including the
   deduction for pension contributions relieved at source in Step 3.
 - Gifts are assumed to qualify. The model does not charge the donor for a

policyengine_uk/parameters/gov/hmrc/income_tax/rates/scotland/rates.yaml

@@ -73,12 +73,11 @@ brackets:
   - threshold:
       values:
         2017-04-06: null
-        # Top rate threshold: £125,140 total income = £112,570 above PA
-        # (£125,140 - £12,570 personal allowance)
-        2024-04-06: 112_570
-        2025-04-06: 112_570
-        # Scottish Budget 2025-26 announced freeze through 2026-27
-        2026-04-06: 112_570
+        # The personal allowance is fully withdrawn at £125,140, so the
+        # taxable-income top limit equals total income: do not subtract PA.
+        2024-04-06: 125_140
+        2025-04-06: 125_140
+        2026-04-06: 125_140
       metadata:
         uprating: gov.economic_assumptions.indices.obr.consumer_price_index
     rate:
@@ -89,6 +88,14 @@ metadata:
   rate_unit: /1
   label: Scottish Income Tax rates
   reference:
+    - title: Scottish Rate Resolution 2024-25 (S6M-12252), paragraphs (a)-(f)
+      href: https://www.parliament.scot/chamber-and-committees/votes-and-motions/S6M-12252
+    - title: Scottish Rate Resolution 2025-26 (S6M-16531), paragraphs (a)-(f)
+      href: https://www.parliament.scot/chamber-and-committees/votes-and-motions/S6M-16531
+    - title: Scottish Rate Resolution 2026-27 (S6M-20844), paragraphs (a)-(f)
+      href: https://www.parliament.scot/chamber-and-committees/votes-and-motions/S6M-20844
+    - title: Scottish Rate Resolution 2026-27 explanatory note - personal allowance and top limit
+      href: https://www.gov.scot/publications/scottish-rate-resolution-2026-2027-draft-motion-explanatory-note/pages/3/
     - title: GOV.UK
       href: https://www.gov.uk/government/publications/rates-and-allowances-income-tax/income-tax-rates-and-allowances-current-and-past
     - title: Scottish Budget 2025-26 - Higher rate threshold freeze

policyengine_uk/tests/policy/baseline/finance/tax/income_tax/scottish_rates.yaml

@@ -11,9 +11,9 @@
   period: 2025
   absolute_error_margin: 0
   input:
-    # Top rate (48%) starts at 125,140 total income (112,570 above PA)
-    # At this income, PA is fully tapered, so taxable income = 125,140
-    # This exceeds the top rate threshold of 112,570
+    # The personal allowance is fully withdrawn at £125,140; the taxable
+    # top-rate limit is £125,140 too. tax_band classification is separate
+    # from the amount of income charged at 48% (see #2350).
     adjusted_net_income: 125140
     region: SCOTLAND
   output:
@@ -25,10 +25,105 @@
   absolute_error_margin: 0
   input:
     # 100,000 income is above advanced rate threshold (62,430 above PA)
-    # but below top rate threshold (112,570 above PA)
+    # but below the £125,140 taxable top-rate threshold
     # PA at 100,000 is 12,570 (not yet tapered), taxable = 87,430
     adjusted_net_income: 100000
     region: SCOTLAND
   output:
     # TaxBand enum uses ADDITIONAL for both Advanced (45%) and Top (48%) rates
     tax_band: ADDITIONAL
+
+- name: Scottish 2024 pay of 120000 has no tax at the 48 percent rate
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    age: 45
+    employment_income: 120000
+    region: SCOTLAND
+  output:
+    # S6M-12252: 45% continues to £125,140 of taxable income.
+    # https://www.parliament.scot/chamber-and-committees/votes-and-motions/S6M-12252
+    earned_taxable_income: 117430
+    earned_income_tax: 44278.31
+    income_tax: 44278.31
+
+- name: Scottish 2024 pay of 150000 has exactly 24860 taxed at 48 percent
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    age: 45
+    employment_income: 150000
+    region: SCOTLAND
+  output:
+    # Lower bands: £47,747.81; top band: £24,860 * 48% = £11,932.80.
+    earned_taxable_income: 150000
+    earned_income_tax: 59680.61
+    income_tax: 59680.61
+
+- name: Scottish 2025 pay of 120000 has no tax at the 48 percent rate
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    age: 45
+    employment_income: 120000
+    region: SCOTLAND
+  output:
+    # S6M-16531: 45% continues to £125,140 of taxable income.
+    # https://www.parliament.scot/chamber-and-committees/votes-and-motions/S6M-16531
+    earned_taxable_income: 117430
+    earned_income_tax: 44263.80
+    income_tax: 44263.80
+
+- name: Scottish 2025 pay of 150000 has exactly 24860 taxed at 48 percent
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    age: 45
+    employment_income: 150000
+    region: SCOTLAND
+  output:
+    # Lower bands: £47,733.30; top band: £24,860 * 48% = £11,932.80.
+    earned_taxable_income: 150000
+    earned_income_tax: 59666.10
+    income_tax: 59666.10
+
+- name: Scottish 2026 pay of 120000 has no tax at the 48 percent rate
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    age: 45
+    employment_income: 120000
+    region: SCOTLAND
+  output:
+    # S6M-20844: 45% continues to £125,140 of taxable income.
+    # https://www.parliament.scot/chamber-and-committees/votes-and-motions/S6M-20844
+    earned_taxable_income: 117430
+    earned_income_tax: 44232.05
+    income_tax: 44232.05
+
+- name: Scottish 2026 pay of 150000 has exactly 24860 taxed at 48 percent
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    age: 45
+    employment_income: 150000
+    region: SCOTLAND
+  output:
+    # Lower bands: £47,701.55; top band: £24,860 * 48% = £11,932.80.
+    earned_taxable_income: 150000
+    earned_income_tax: 59634.35
+    income_tax: 59634.35
+
+- name: Scottish 2026 pay of 130000 has exactly 4860 taxed at 48 percent
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    age: 45
+    employment_income: 130000
+    region: SCOTLAND
+  output:
+    # S6M-20844: lower bands £47,701.55 plus £4,860 * 48% = £2,332.80.
+    # Companion to Axiom scot_e130k_top_rate_pa_tapered.
+    earned_taxable_income: 130000
+    earned_income_tax: 50034.35
+    income_tax: 50034.35

policyengine_uk/tests/policy/baseline/gov/hmrc/income_tax/gift_aid.yaml

@@ -201,8 +201,11 @@
     employment_income: [150_000, 150_000]
     gift_aid: [0, 800]
   output:
+    # S6M-20844: £47,701.55 in the lower bands, plus £24,860 at 48%.
+    # https://www.parliament.scot/chamber-and-committees/votes-and-motions/S6M-20844
+    # s.414 raises the £125,140 top limit to £126,140 for the donor.
     # Rate steps 1%, 21%, 3% and 3% on £1,000 gross give £280 relief.
-    income_tax: [60_011.45, 59_731.45]
+    income_tax: [59_634.35, 59_354.35]
 
 - name: A large Gift Aid gift can cross several Scottish bands
   period: 2026

policyengine_uk/tests/test_gift_aid.py

@@ -8,9 +8,8 @@
 https://www.legislation.gov.uk/ukpga/2007/3/section/415
 https://www.legislation.gov.uk/ukpga/2007/3/section/58
 
-The differential integrates the model's existing rate schedules independently.
-It preserves their unrelated baseline policy choices, including the Scottish
-top-rate threshold, to isolate the effect of extending limits for Gift Aid.
+The differential integrates the model's rate schedules independently to
+isolate the effect of extending limits for Gift Aid.
 """
 
 import numpy as np
@@ -267,15 +266,17 @@ def test_explicit_zero_gift_matches_omitted_input(sim, omitted_sim, drawn):
         assert before.tobytes() == after.tobytes(), variable
 
 
-def test_zero_gift_preserves_main_outputs_bit_for_bit():
-    """Freeze main's intermediate and final outputs, including mixed income.
+def test_zero_gift_preserves_baseline_outputs_bit_for_bit():
+    """Freeze intermediate and final outputs, including mixed income.
 
     Frozen from main at 3381500f4 (after #2352 put savings and dividends
     above property income, and the Scottish personal savings allowance
-    moved to the UK bands). Re-freeze from main when main moves these.
+    moved to the UK bands). The Scottish £150,000 case uses the corrected
+    £125,140 top-rate limit from S6M-20844 (#2130), giving £59,634.35:
+    https://www.parliament.scot/chamber-and-committees/votes-and-motions/S6M-20844
 
     Gift Aid's zero-input compatibility also applies to inherited baseline
-    choices about property stacking, the Scottish schedule and taxpayer bands.
+    choices about property stacking and taxpayer bands.
     Exact float32 expectations catch changes hidden by a tax-level tolerance.
     """
     rows = [
@@ -319,7 +320,7 @@ def test_zero_gift_preserves_main_outputs_bit_for_bit():
             28_032,
             3451.070068359375,
             13182.0498046875,
-            60011.44921875,
+            59634.3515625,
             3451.070068359375,
             0,
             31407.05078125,
@@ -336,7 +337,7 @@ def test_zero_gift_preserves_main_outputs_bit_for_bit():
             28_032,
             3451.070068359375,
             13182.0498046875,
-            60011.44921875,
+            59634.3515625,
             14043.3203125,
             3307.25,
             31407.05078125,
@@ -408,7 +409,7 @@ def test_explicit_adjusted_net_income_preserves_tax_base(ani, net_gift):
         "scottish",
     ),
     "Scotland, six rates": (
-        [0, 3_967, 16_956, 31_092, 62_430, 112_570],
+        [0, 3_967, 16_956, 31_092, 62_430, 125_140],
         [0.19, 0.20, 0.21, 0.42, 0.45, 0.48],
         "scottish",
     ),

policyengine_uk/tests/test_scottish_income_tax_rates.py

@@ -1,7 +1,18 @@
+import pytest
+
 from policyengine_uk.system import system
 
 
-def test_scottish_income_tax_thresholds_updated_for_2026():
-    rates = system.parameters.gov.hmrc.income_tax.rates.scotland.rates("2026-04-06")
+@pytest.mark.parametrize(
+    "year, thresholds",
+    [
+        # Scottish Rate Resolutions S6M-12252, S6M-16531 and S6M-20844.
+        (2024, [0, 2306, 13991, 31092, 62430, 125140]),
+        (2025, [0, 2827, 14921, 31092, 62430, 125140]),
+        (2026, [0, 3967, 16956, 31092, 62430, 125140]),
+    ],
+)
+def test_scottish_income_tax_thresholds_match_the_resolution(year, thresholds):
+    rates = system.parameters.gov.hmrc.income_tax.rates.scotland.rates(f"{year}-04-06")
 
-    assert rates.thresholds == [0.0, 3967, 16956, 31092, 62430, 112570]
+    assert rates.thresholds == thresholds