Treat income derived from capital as capital in the legacy means tests

[MaxGhenis]

Summary

PolicyEngine UK made two errors in the legacy means tests: Income Support, Housing Benefit, Pension Credit and council tax reduction.

• It counted property_income, which is rent from property other than the home, as income.
• It deducted all of a person's income tax, including the tax on rent, interest and dividends.

The regulations treat income derived from capital as capital, not income. The capital counts instead, through the capital limits and tariff or deemed income. Tax is disregarded only on income that is taken into account. Rent for letting part of the claimant's own home is the exception: it stays income, less £20 a week per occupier.

This PR makes five changes:

• Removes property_income from IS, HB (working age and pension age), Pension Credit and council tax reduction income.
• Counts land and property in council tax reduction capital, and adds CTR tariff income. IS, HB and Pension Credit already count land and property. CTR counted household savings only, so it needs the property once the rent stops counting.
  • Capital now covers savings, land, and residential and non-residential property other than the home (gov.local_authorities.council_tax_reduction.capital.sources). Land and property are valued at 90% of market value for the expenses of sale (capital.sale_expenses).
  • With a UC award, capital is the UC assessment, as the schemes require. Scotland from April 2022 is the exception: its authority calculates capital itself.
  • Oxford ignores capital already assessed for UC or income-related benefits (its Appendix 6).
  • New council_tax_reduction_tariff_income adds the income the national schemes (England for pensioners, Wales, Scotland) treat capital as yielding. Before, they had none. This is the tariff part of Pensioner council tax reduction: applicable amount (post-April-2021 allowance, children, severe disability premium) and income (Child Benefit, tariff income) #1933.
• Adds legacy_benefits_home_letting_income (BenUnit). It is the claimant's and partner's sublet_income less the sub-tenant disregard, assuming one occupier. The disregard is £20 a week; working-age claimants had £4 before April 2008, as did everyone before Pension Credit in October 2003. It goes into IS, HB, Pension Credit and council tax reduction. Scotland's scheme for people under pension age excludes it from 1 April 2022.
• Adds legacy_means_test_income_tax (Person), deducted in place of income_tax in all four tests. It is the tax on the income these tests count: the Step 4 tax on earnings, pensions and taxable benefits (ITA 2007 s.23), less that tax's pro-rata share of the Step 6 reductions. Step 7 charges are not deducted.
• Selects the Scottish working-age CTR scheme as everyone outside the pension-age scheme (~council_tax_reduction_pensioner, from Apply the benefit cap to mixed-age couples on Universal Credit, and keep them off pensioner Council Tax Reduction #1944). A UC award held only by people over pensionable age no longer selects it.

Universal Credit is unchanged: its own fix is #1950. Tax credits already count investment and property income, and that is correct (see "Tax credits").

Worked case (2026), from SPC Regs Sch IV para 18: a single pensioner aged 80 with a State Pension of £10,000 and £4,000 of rent from a let flat.

• On main, Pension Credit counts the rent less its £86 of tax, giving income of £13,914 and no guarantee credit.
• On this branch, income is £10,000, so guarantee credit is (238 − 10,000/52) × 52 = £2,376. This takes the flat's value as capital of £10,000 or less, supplied separately; above £10,000 it yields deemed income of £1 a week per £500 (reg 15(6)).

Law

All texts were read today from legislation.gov.uk (/data.xml). Verbatim copies, the fetch script and a paragraph locator are kept with the review notes.

Working age. IS Regs 1987 reg 48(4) (https://www.legislation.gov.uk/uksi/1987/1967/regulation/48):

Except any income derived from capital disregarded under paragraph 1, 2, 4, 6, 12 , 25 to 28, 44 or 45 of Schedule 10, any income derived from capital shall be treated as capital but only from the date it is normally due to be credited to the claimant's account.

IS Sch 9 para 22(1) (https://www.legislation.gov.uk/uksi/1987/1967/schedule/9) disregards as income:

Any income derived from capital to which the claimant is or is treated under regulation 52 (capital jointly held) as beneficially entitled but, subject to sub-paragraph (2), not income derived from capital disregarded under paragraph 1, 2, 4, 6 12 or 25 to 28 of Schedule 10.

The same rule appears in:

• HB Regs 2006 reg 46(4) and Sch 5 para 17;
• JSA Regs 1996 reg 110(4) and Sch 7 para 23;
• ESA Regs 2008 reg 112(4) and Sch 8 para 23.

The exceptions are income from capital that is itself disregarded. That covers the home, premises being acquired, sold or repaired, premises occupied by an old or incapacitated relative, business assets and personal-injury trusts. For some of these premises the income counts only net of mortgage repayments, council tax and water charges (para 22(2)). DMG 28196: "treat as capital any other income received from premises apart from income from the home".

Pension age. HB (SPC) Regs 2006 Sch 5 para 22 (https://www.legislation.gov.uk/uksi/2006/214/schedule/5) and SPC Regs 2002 Sch IV para 18 (https://www.legislation.gov.uk/uksi/2002/1792/schedule/IV) both read:

Except in the case of income from capital specified in Part 2 of Schedule 6, any actual income from capital.

(In the SPC version the exception is "Part II of Schedule V".) The capital yields deemed income instead (reg 29(2); reg 15(6)). DMG 85007: where deemed income applies, "any actual income generated from the capital is fully disregarded". Its example is rent from a let share of a second property.

The Part 2 / Part II exceptions keep some actual income counted: life interests and life rents, rent where the claimant has no reversionary interest, annuities, and property held on certain trusts for the claimant (SPC Sch V paras 24-28). HB (SPC) and the pensioner CTR schemes also disregard actual Part 2 income where that capital totals £10,000 or less. The data cannot identify any of these.

Rent for part of the home.

• Working age (IS Sch 9 para 19; HB Sch 5 para 22; JSA Sch 7 para 20; ESA Sch 8 para 20). The home is disregarded capital, so reg 48(4) does not convert the rent, and the disregard is:

  (a) where the aggregate of any payments made in respect of any one week in respect of the occupation of the dwelling by that person or a member of his family, or by that person and a member of his family, is less than £20, the whole of that amount; or (b) where the aggregate of any such payments is £20 or more per week, £20.

  SI 2007/2618 regs 5(12) and 11(12) substituted £20 from April 2008. Before then it was £4, plus a further amount where the payment included heating, which is not modelled.

• Pension age: SPC reg 15(5)(i) and HB (SPC) reg 29(1)(v) list "any payment of rent made to a claimant who ... occupies part of the property", and Sch IV para 9 / Sch 5 para 10 disregard £20. That has applied since the 2002 Regulations as made.

• Board and lodging has its own disregard: £20 plus half the excess (IS Sch 9 para 20; HB Sch 5 para 42; SPC Sch IV para 8).

Tax. IS Sch 9 para 1 and HB Sch 5 para 1:

Any amount paid by way of tax on income which is taken into account under regulation 40 (calculation of income other than earnings).

HB (SPC) reg 33(12) and SPC reg 17(10)(a): "In the case of any income taken into account for the purpose of calculating a person's income, there shall be disregarded any amount payable by way of tax." Tax on income the tests do not take into account is therefore not deducted.

Income Tax Act 2007 s.23 builds liability in steps (https://www.legislation.gov.uk/ukpga/2007/3/section/23):

• Step 4 calculates tax on each component of income.
• Step 6 deducts tax reductions such as the married couple's allowance and the reliefs in other_tax_credits.
• Step 7 adds charges, such as the High Income Child Benefit Charge and the pension annual allowance charge (s.30).

legacy_means_test_income_tax is therefore the Step 4 tax on counted income (earned_income_tax: earnings, pensions and taxable benefits), less its share of the Step 6 reductions. Step 7 charges are not tax calculated on counted income, so they are not deducted.

Most reductions are not tied to any income: s.27 orders them only to give the greatest reduction in liability. Some are tied:

• foreign tax credit reduces the tax on the income the foreign tax was paid on (TIOPA 2010 ss.18(2) and 36);
• residential finance-cost relief is given on at most the property business's profits (ITTOIA 2005 ss.274A and 274AA).

other_tax_credits mixes these with venture capital trust, enterprise investment, maintenance and other reductions, and records no source. So the model shares every reduction in proportion to the Step 4 tax on each kind of income, as a stated convention. A credit for foreign tax on rent is therefore partly attributed to counted income, and the tax deducted is too low. Splitting the input by source would fix that. In the Enhanced FRS this step changes nothing (step 5 below). If income_tax is supplied and differs from the tax its components imply, the difference falls on the tax on counted income.

Council tax reduction.

Scheme	Income from capital	Part of the home	Tax
England, pensioners (SI 2012/2885)	Sch 5 para 23 disregards actual income from capital	Sch 1 para 16(1)(v), Sch 5 para 10 (£20)	Sch 1 para 17(13)
England, default scheme (SI 2012/2886)	para 64(5) treats it as capital; Sch 8 para 22	Sch 8 para 26 (£20)	Sch 8 para 4
Wales (WSI 2013/3029), pensioners and working age	Sch 4 para 23; Sch 6 para 27(5) and Sch 9 para 22	Sch 4 para 10; Sch 9 para 26	Sch 1 para 11(13); Sch 9 para 4
Scotland, pension age (SSI 2012/319)	Sch 3 para 22	reg 27(1)(v), Sch 3 para 9	reg 31(12)
Scotland, working age (SSI 2021/249, from 1 April 2022)	reg 57(1) is a closed list with only the assumed yield (reg 63); reg 63(3) treats actual income as capital	no head in reg 57(1), so not counted	tax on earnings only (regs 49, 51)
Scotland, working age before April 2022 (SSI 2012/303)	treated as capital	Sch 4 para 25 (£20)

Selecting the Scottish scheme follows SSI 2021/249 reg 3. It covers everyone outside the pension-age scheme: applicants under pensionable age, and those over it where the applicant or partner has a qualifying income-related benefit or an award of UC. council_tax_reduction_pensioner counts a UC award only where a claimant or partner is under the qualifying age, as UC itself requires (UC Regs 2013 reg 3(2)(a)). So a joint award held only by people over pensionable age does not select the scheme (reg 3(2)). The model has no inputs for reg 3(2)'s other statuses (an award continuing pending supersession, an award the person was not entitled to, a claim awaiting determination) or for reg 3(3).

That scheme deducts only tax on earnings, while the shared tax variable deducts tax on all counted income, pensions included. This PR's change for it is only that tax on rent, interest and dividends is no longer deducted. The scheme's own earnings rules are for #1966.

CTR capital and tariff income. Every scheme counts the whole of the applicant's capital unless a schedule disregards it, and above £16,000 there is no reduction (SI 2012/2885 Sch 1 para 31(1) and reg 11(2); WSI 2013/3029 reg 30). The model's CTR capital was household savings only. It now also counts land and property other than the home, valued less 10% for the expenses of sale. The citations are SI 2012/2885 Sch 1 para 32(a), the default scheme para 65, WSI 2013/3029 Sch 1 para 26 and Sch 6 para 28, SSI 2012/319 reg 42, SSI 2012/303 reg 46 and SSI 2021/249 reg 70.

• Secured debt is not deducted: mortgage_debt covers debt on any UK land or property, home included.
• Shares and other investments stay out until pension wealth can be separated from corporate_wealth (Pensioners without Pension Credit are tested on household savings only for the council tax reduction capital limit #1936).
• With a UC award, capital is the Secretary of State's UC assessment (default scheme para 37(6); WSI 2013/3029 Sch 6 para 9(6); SSI 2012/303 reg 26). The exception is Scotland from 1 April 2022, where SSI 2021/249 regs 66-70 have the authority calculate it.
• Oxford's Appendix 6 ignores capital "already taken into account" for UC, IS, income-based JSA or income-related ESA before its paragraph 28 limit.

The national schemes treat capital as yielding a weekly tariff income, counting capital up to the limit:

Who	Tariff
Pensioners: England (SI 2012/2885 Sch 1 para 37), Wales (WSI 2013/3029 Sch 1 para 31), Scotland (SSI 2012/319 reg 27(2))	£1 for each £500, or part, over £10,000
Under pension age: Wales (Sch 6 para 33), Scotland (SSI 2012/303 reg 51; from April 2022 SSI 2021/249 reg 63(1)(b))	£1 for each £250, or part, over £6,000
Under pension age with UC: Wales and Scotland to March 2022 through the Secretary of State's income (Sch 6 para 9; SSI 2012/303 reg 26), Scotland from April 2022 by reg 63(1)(a)	£4.35 a month for each £250, or part, over £6,000 (UC Regs 2013 reg 72)

The tariff is nil:

• on the Pension Credit routes, whose income already includes the deemed income or is wholly disregarded;
• for people on IS, income-based JSA or income-related ESA. Wales (Sch 10 para 8) and Scotland before April 2022 (SSI 2012/303 Sch 5 para 7) disregard their whole capital, and from April 2022 their income is not assessed (SSI 2021/249 reg 13(11)).

English schemes for people under pension age are local. Kingston, Westminster and Oxford set their own tariff; Merton and Newham have none in the model (inherited).

The five English local schemes the model runs (Merton, Newham, Westminster, Kingston upon Thames and Oxford) were checked against their published 2025-26 and 2026-27 scheme texts. Each treats income derived from capital as capital for applicants not on UC and disregards £20 of sub-tenant rent. Westminster's full scheme text was not found, so for Westminster this is inferred from its stated mirroring of the default scheme. Oxford's UC appendix disregards home-letting receipts in full, but Oxford's formula already uses the generic CTR income for UC recipients; that is inherited and unchanged.

Northern Ireland has the same words: HB (NI) Regs 2006 reg 43(4) and Sch 6 paras 18 and 23; SPC Regs (NI) 2003 Sch 4 paras 9 and 18.

Tax credits

Tax Credits (Definition and Calculation of Income) Regs 2002 reg 3, Step One, adds "the investment income (as defined in regulation 10)" and "the property income (as defined in regulation 11)":

• reg 10(1) covers gross interest and dividends;
• reg 11(1) covers "the annual taxable profits arising from a business carried on for the exploitation, as a source of rents or other receipts, of any estate, interest or rights in or over land in the United Kingdom".

So tax_credits_applicable_income is right to count all three, and it is unchanged. Two small gaps remain, both in years before tax credits ended in April 2025:

• reg 10(2)(a) Table 4 disregards ISA interest and dividends, which savings_interest_income includes;
• reg 11(2) disregards rent-a-room profits.

What still counts

Route	Law	Model
The capital itself	tariff / deemed income and capital limits (IS reg 53, HB reg 52, HB (SPC) reg 29(2), SPC reg 15(6), the CTR schemes)	Let property counts as capital in IS, HB and Pension Credit, and now in CTR too, with the national CTR schemes' tariff income.
Rent from part of the home	as above	legacy_benefits_home_letting_income
Board and lodging	£20 + 50% of the excess	not modelled: there is no input. The householder-side boarder and lodger work stacks on this PR and extends the same variable.
Rent from premises whose value is disregarded (for sale, a relative's home, repairs)	counts, net of mortgage, council tax and water	not identifiable in the data. The model counts those premises' value as capital, consistently with treating their rent as capital.
Pension-age Part 2 capital (life interest, rent with no reversionary interest, annuity, some trusts)	income counts	not identifiable
Lettings that are a trade (B&B)	self-employed earnings	already in self_employment_income

Data caveat and release gate. Owner-occupiers' rent from letting part of their home (FRS SUBRENT) sits in uk-data's property_income, not sublet_income. It stays there until PolicyEngine/policyengine-uk-data#508 moves it. Until then this PR drops it from these means tests instead of counting it less £20.

This PR prepares the channel; on its own it does not correct production assessments for that rent. The gate, recorded on #508:

1. this PR and Model rent from boarders, lodgers and sub-tenants for the householder #2002 are released;
2. the data move ships in the batched data release with an aggregate conservation check (the total leaving property_income equals the new sublet_income);
3. the lock is bumped.

In the raw FRS 2024-25, 33 owner households report SUBRENT, a weighted £0.41bn a year. Fewer than ten of them are in households reporting Pension Credit, Income Support, Housing Benefit, JSA, ESA or council tax reduction, using uk-data's own benefit codes.

Invariants (stated and tested)

policyengine_uk/tests/test_legacy_means_test_income_from_capital_properties.py (Hypothesis) checks these over populations of up to four families. The families are single, couple and lone-parent, pension and working age, in five regions including Scotland, Wales and Northern Ireland, in 2025 and 2026:

1. Invariance. Scaling property, savings interest and dividend income (×0, ×3) changes none of the four means-test incomes, and none of IS, HB, Pension Credit or council tax reduction.
   • UC and tax credits are held fixed, and incomes stay inside the basic rate band.
   • Marriage Allowance is held at nil. Whether a spouse can transfer it depends on their income, including income from capital, which is a legitimate way for income from capital to change the tax on counted income.
   • On main this fails. For example, a pensioner's rent counts in Pension Credit income less its tax.
2. Bounds. 0 ≤ counted home-letting income ≤ the rent, and it equals max(0, rent/52 − disregard) × 52, with a £4 working-age disregard before April 2008.
3. Monotone. More rent from part of the home never lowers a means-test income, and never raises IS, HB, Pension Credit or council tax reduction.
4. Tax bounds. 0 ≤ legacy_means_test_income_tax ≤ min(income_tax, earned_income_tax), with equality to income_tax when there is no savings, dividend or property income and no Step 7 charge.
5. Tariff. 0 ≤ council_tax_reduction_tariff_income ≤ £2,088, the yield at the £16,000 limit (40 steps of £250 at £4.35 a month). It is nil in Northern Ireland and for English people under pension age, whose local schemes set their own. It never falls when savings rise while the family stays on the same route.

#1909's CTR property tests now use the new income and capital definitions as their reference: tariff income, sale expenses and the UC capital route, recomputed from the regulations.

The runs below add a differential check. In 2026 the rent step lowers each means-test income by exactly the unit's rent less its tax, wherever neither run is at a floor, to float32 rounding. The rent and tax are summed over the members each test counts. UC and tax credits are identical in every year.

Tests

• New gov/dwp/legacy_means_tests/income_from_capital.yaml: 37 cases hand-computed from the regulations, with the arithmetic in each case.

  • IS: a lone parent with rent (8,960).
  • HB:
    • working age with rent, interest and dividends (13,339.60);
    • a working-age award with rent from a let property (2,780.29, against nil if the rent counted);
    • pension age with sub-tenant rent (17,874).
  • Pension Credit: with rent (guarantee credit 2,376) and with dividends (savings credit 668.22).
  • CTR income: England pensioner (13,560), Scottish working-age (12,000), Welsh working-age (13,560).
  • CTR capital:
    • a let property worth more than £16,000 ends CTR for an English pensioner (valued at £90,000) and a Welsh working-age applicant (£45,000);
    • an English pensioner's £17,000 property is valued at £15,300, so CTR is £1,618.
  • CTR tariff income:
    • Welsh and Scottish working-age with property below the limit (tariff £624, CTR £775.20);
    • Welsh and Scottish pensioners (£312);
    • a Welsh IS recipient (nil).
  • The savings-credit exit: £200 more sub-tenant rent ends a £40 savings credit. CTR income rises from £14,650.54 to £14,810.54, and the award falls from £1,732.29 to £1,700.29.
  • UC capital:
    • Oxford, with a UC capital assessment of £15,000 against £20,000 of household property: CTR £2,000;
    • an Oxford IS recipient: CTR £2,000;
    • Wales: capital £15,000, assumed yield £1,879.20, CTR £1,500;
    • Scotland in 2026: own calculation, nil;
    • Scotland in 2021: UC assessment, £1,500.
  • Scottish scheme selection:
    • a mixed-age couple on UC;
    • a joint UC award held only by people over pension age (£5,160);
    • sub-tenant rent counted in 2021 but not in 2023.
  • The tax rule:
    • a shared Step 6 reduction (63.60 deducted);
    • a High Income Child Benefit Charge not deducted;
    • the floor when reductions exceed the Step 4 tax.
  • Disregards: the £20, £4 and pre-2003 disregards, the one-occupier rule, and a dependant's sublet rent not counting.

• Existing cases that now give the legal answer:

  • "Added Tax and income" (HB): 4,500 → 3,500. This is labelled as an isolated check of the formula's components, since in law an IS recipient's whole income and child benefit are disregarded (Sch 5 paras 4, 65).
  • Pension Credit "Case 4", rent from a let property: income 15,260 → 4,784, Pension Credit 0 → 7,592.
  • Disregard guarantee credit recipients' income and capital in pensioner council tax reduction #1909's "pensioner not claiming Pension Credit": capital 10,000 → 16,300 with the second property at 90%, so CTR 1,999.60 → 0.
  • Disregard guarantee credit recipients' income and capital in pensioner council tax reduction #1909's "capital of exactly 16,000": CTR 2,000 → 1,954.80 with the £624 tariff.

• The Hypothesis properties above, and Disregard guarantee credit recipients' income and capital in pensioner council tax reduction #1909's updated CTR properties: 13 tests, all passing on 0f4e0e3.

• Mutation check (round 2). Twelve mutations of the new code each make at least one YAML case fail:

  • tariff income dropped, uncapped, on the weekly rate for UC holders, applied on the Pension Credit routes, applied for passported claimants, or with a £250 pensioner step;
  • no sale expenses;
  • no UC capital route, or Scotland always on it;
  • Oxford's Appendix 6 removed;
  • the Scottish selector by age only;
  • the tax floor removed.

  Round 1's nine mutants were also all killed.

Enhanced FRS impact

Every figure is from real Microsimulation runs on private copies of enhanced_frs_2024_25.h5 (sha256 e433e532…), from clean trees. Nothing is scaled, interpolated or allocated:

• main at bfc5fea, the base of this branch's last merge;
• this branch at 0f4e0e3.

Year	Pension Credit, main (£bn)	PC change	PC gainers, k units (records)	PC losers, k units (records)	CTR change	CTR gainers / losers (records)	Household net income
2025	6.42	+£37.0m	62.6 (44)	80.8 (122)	+£10.3m	24 / 42	+£55.9m
2026	7.13	+£1.3m	64.0 (46)	81.5 (130)	+£10.6m	24 / 38	+£28.5m
2027	7.07	−£16.3m	63.0 (42)	81.8 (130)	+£12.0m	22 / 44	+£12.3m
2028	7.05	−£4.8m	63.1 (40)	83.3 (130)	+£12.1m	24 / 42	+£32.2m
2029	7.15	−£15.5m	63.4 (40)	82.6 (130)	+£12.8m	22 / 40	+£22.0m
2030	6.66	−£56.6m	61.2 (34)	82.8 (130)	+£14.7m	24 / 40	−£18.4m

The other benefits:

• Housing Benefit falls in every year, by less than £0.01bn from fewer than ten records.
• Income Support (2025), Universal Credit and tax credits do not change.
• Poverty status changes for at most 12 person records in any year, so no poverty figure is given.

2026, step by step. Real runs, each adding one part of the change to the last (scratch commits, not for merge). Interest and dividends were run as separate steps, but they are shown together: the interest step alone rests on fewer than ten records.

Step	Pension Credit	Council tax reduction	Housing Benefit
1. CTR capital: land and property at 90%, the UC assessment, Oxford's Appendix 6	0	0	0
2. National CTR tariff income	0	−£0.4m: 4.1k units lose (10 FRS + 6 SPI-synthetic records)	0
3. Rent no longer counted, and its tax no longer deducted	+£208.1m: 64.3k units gain, 61.8k newly entitled (42 FRS + 8 SPI)	+£12.1m: 14.0k gain (10 FRS + 14 SPI)	0
4. Tax on interest and dividends no longer deducted	−£206.8m: 82.2k units lose, 24.4k lose all (132 FRS + 6 SPI)	−£1.1m: 4.3k lose (20 FRS + 4 SPI)	a loss under £1m (fewer than ten records)
5. Step 7 charges no longer deducted, reductions shared	0	0	0
Total	+£1.3m (gains £206.6m, losses £205.4m)	+£10.6m (gains £12.1m, losses £1.5m)	a loss under £1m

Why step 1 changes nothing here. It is not because recipients have no assets. In 2026, 242 benefit-unit records receiving CTR have land or other property:

• 234 are English working-age households. The dataset has no local-authority input, so the model's default authority applies, and it has no simulated working-age scheme there.
• 8 are in Northern Ireland.

council_tax_benefit keeps the reported award wherever no simulated scheme covers the household, so the new capital test does not reach any of them. Step 2 is small for the same reason: tariff income changes awards only where a national scheme is simulated.

Checks between real runs, all passing:

• Step 2 (tariff): it raises CTR income by exactly the new tariff income, for every unit.
• Step 3 (rent): it lowers each means-test income by exactly the unit's rent less its tax, wherever neither run is at a floor, to float32 rounding. The rent and tax are summed over the members each test counts.

Most of the gross flow comes from the data, not the rule

Let-property capital is missing. In the dataset:

• 82% of property income (£48.4bn of £59.1bn in 2026) is in benefit units whose household records no let-property value;
• the share is 93% (£23.8bn of £25.5bn) for units with someone over State Pension age;
• all of step 3's Pension Credit gain is in such units.

In law those units have the let property as capital, which yields deemed income or ends entitlement. Treating rent as capital is right, but here it leaves no capital behind. So step 3's gain overstates what the rule does to a household whose capital is recorded.

Dividends are imputed. policyengine-uk-data main b45c373 imputations/income.py impute_income() calls impute_over_incomes(dataset, model, ["dividend_income"]) on the FRS half. That replaces every respondent's dividends with an SPI-trained QRF prediction from age, gender and region. Step 4's losses are almost all on FRS records, so they rest on those imputed dividends.

Two sensitivities (real runs of main and this branch, 2026):

Dataset	PC change	PC gainers / losers, k units (records)	CTR change	Household net income
As above	+£1.3m	64.0 (46) / 81.5 (130)	+£10.6m	+£28.5m
Capital-consistent copy (see below)	+£4.6m	2.1 (12) / 6.7 (22)	−£3.8m	+£0.9m
uk-data#498 rebuild (see below)	+£117.5m	56.8 (40) / 1.8 (10)	+£15.4m	+£143.9m

• Capital-consistent copy. Each household's savings, corporate_wealth and let-property value are raised where needed to at least interest / 4%, dividends / 4% and rent / 7%. These are assumed yields, not observed capital, and the script is the one used for Stop counting interest, dividends and rent as Universal Credit unearned income #1950. With the property recorded, CTR falls, because the property now counts in CTR capital and tariff income.
• uk-data#498 rebuild. It was built locally by the UC-eligible units with six-figure dividends: dividends treated as yield of a few thousand pounds of imputed capital #1948 work and keeps FRS-reported dividends. It is a different rebuilt and reweighted dataset: its weights, population and several other inputs differ too. So the comparison is this PR's effect on that dataset, not the effect of reported dividends alone.

For any one household, the direction of the change follows from the law. The net total depends on how the data record capital and dividends.

Not counted here, though the law counts it:

• owner-occupiers' sublet rent, which sits in property_income until uk-data#508;
• board and lodging receipts, which Model rent from boarders, lodgers and sub-tenants for the householder #2002 adds.

Overlaps

• Stacked on this branch: Model rent from boarders, lodgers and sub-tenants for the householder #2002, the householder boarder/lodger work (branch boarder-lodger-rent). It extends legacy_benefits_home_letting_income with lodger and boarder receipts, and counts rent-a-room tax as tax on counted income in legacy_means_test_income_tax.
• The "Add missing Pension Credit income sources" branches append to the Pension Credit income list. They leave property income and the tax line to this PR.
• Replace generic child and adult flags with each programme's legal definitions #1896 (merged) restricted the four formulas to the claimant, partner and the programme's children. This branch merges it and keeps both changes; legacy_benefits_home_letting_income counts only the claimant's and partner's rent. Give the legacy severe disability premium its statutory conditions (stacked on #1896) #1946 and Use one carer attribution for the legacy severe disability premium and the Pension Credit addition (stacked on #1946 and #1951) #1977 stack on Replace generic child and adult flags with each programme's legal definitions #1896 and change premiums, not these lines.
• Count Carer's Allowance and Carer Support Payment as Pension Credit income #1952 (merged) added carer benefits to the PC list and HB PERSONAL_BENEFITS; merged here too.
• Count Carer Support Payment as Council Tax Reduction income #1992 (Carer Support Payment as CTR income) edits the same CTR income formula.

Related gaps (not changed here)

• Pensioners without Pension Credit are tested on household savings only for the council tax reduction capital limit #1936: this PR adds land and property to CTR capital. Shares and other investments wait for the pension-wealth split.
• Pensioner council tax reduction: applicable amount (post-April-2021 allowance, children, severe disability premium) and income (Child Benefit, tariff income) #1933: this PR adds the tariff income. The pensioner applicable amount (the £238 allowance from April 2021, children, the severe disability premium) and Child Benefit in pensioner income remain.
• The whole-capital disregard for people on IS, income-based JSA or income-related ESA. It is in Wales Sch 10 para 8, Scotland to March 2022, the English default scheme and Kingston's and Merton's texts. Here it is applied only to the tariff income and to Oxford. It predates this PR for savings. Follow-up.
• Secured debt on CTR property, once Value means-tested capital less 10% sale expenses and secured debt (UC reg 49 and legacy equivalents) #1969's asset-specific debt inputs merge. Follow-up.
• Capital stocks disagree with income from capital, so UC capital tests miss rent, share and savings holders policyengine-uk-data#495: capital stocks disagree with income from capital (the 82% above).
• Move SUBRENT from property_income to sublet_income, after policyengine-uk reads sublet_income policyengine-uk-data#508: owner-occupiers' SUBRENT into sublet_income.
• Tax credits: the ISA and rent-a-room disregards (reg 10(2)(a) Table 4; reg 11(2)) are a separate follow-up.

axiom: rulespec-uk issue being drafted (dispatch-ready pe-parity issue covering:

• IS reg 48(4) and Sch 9;
• HB reg 46(4) and Sch 5;
• HB (SPC) reg 29(1)(i), (v), reg 33(12) and Sch 5;
• SPC reg 15(5)(e), (i), reg 17(10) and Sch IV paras 8, 9, 18;
• the JSA and ESA equivalents;
• the CTR schemes with their capital, sale-expense and tariff rules).

Link to follow.

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