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

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

@@ -0,0 +1,2 @@
+- 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 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, Income Support, Housing Benefit (applicable income and net earnings), Council Tax Reduction and benefit cap means tests now deduct it instead of `income_tax`, and the property allowance election compares it. 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 already deducts only each person's own tax on earnings, which leaves out the charge.

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

@@ -0,0 +1 @@
+- Deprecate `gov.dwp.winter_fuel_payment.eligibility.taxable_income_test`: it is off from 2025 and has effect only in a reform that 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 +1,2 @@
+- From the 2025 qualifying week, pay the Winter Fuel Payment to everyone of pensionable age in England, Wales and Northern Ireland (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, and it charged nobody in Northern Ireland or on the Pension Age Winter Heating Payment. Its boundary was also wrong: total income of exactly £35,000 is not charged.
+- Count the Pension Age Winter Heating Payment in `household_benefits`, `hbai_household_net_income` and `hbai_benefits`, as the Winter Fuel Payment is.

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 +1,7 @@
-description: Households in England or Wales with pensioners earning under this amount of yearly taxable income 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)
-        href: https://www.legislation.gov.uk/ukpga/2026/11/schedule/10
+  2025-01-01: 35_000
 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 pensioners earning under 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/2026/11/schedule/10
+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
@@ -355,7 +355,7 @@ 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
@@ -596,4 +596,4 @@ 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/policy/baseline/finance/benefit/family/housing_benefit/applicable_income/housing_benefit_applicable_income.yaml

@@ -13,7 +13,7 @@
     property_income: 0
     private_pension_income: 0
     # Tax
-    income_tax: 0
+    income_tax_before_winter_fuel_payment_charge: 0
     national_insurance: 0
     # Other 
     tax_credits: 0
@@ -38,7 +38,7 @@
     property_income: 0
     private_pension_income: 0
     # Tax
-    income_tax: 0
+    income_tax_before_winter_fuel_payment_charge: 0
     national_insurance: 0
     # Other 
     tax_credits: 0
@@ -65,7 +65,7 @@
     property_income: 0
     private_pension_income: 0
     # Tax
-    income_tax: 0
+    income_tax_before_winter_fuel_payment_charge: 0
     national_insurance: 0
     # Other 
     tax_credits: 0
@@ -92,7 +92,7 @@
     property_income: 0
     private_pension_income: 0
     # Tax
-    income_tax: 0
+    income_tax_before_winter_fuel_payment_charge: 0
     national_insurance: 0
     # Other 
     tax_credits: 2_000
@@ -118,7 +118,7 @@
     property_income: 0
     private_pension_income: 0
     # Tax
-    income_tax: 0
+    income_tax_before_winter_fuel_payment_charge: 0
     national_insurance: 0
     # Other 
     tax_credits: 0

policyengine_uk/tests/policy/baseline/finance/benefit/family/housing_benefit/applicable_income/housing_benefit_net_earnings.yaml

@@ -112,7 +112,7 @@
         self_employment_income: -25_000
         # Tax and NI as inputs: the test is about attribution, not the
         # income tax calculation.
-        income_tax: 1_486
+        income_tax_before_winter_fuel_payment_charge: 1_486
         ni_class_1_employee: 594.40
     benunits:
       benunit:
@@ -171,7 +171,7 @@
         employment_income: 10_000
         statutory_maternity_pay: 20_000
         private_pension_income: 10_000
-        income_tax: 5_486
+        income_tax_before_winter_fuel_payment_charge: 5_486
         ni_class_1_employee: 1_394.40
     benunits:
       benunit:
@@ -194,7 +194,7 @@
         employment_income: 10_000
         private_pension_income: 10_000
         property_income: -5_000
-        income_tax: 1_486
+        income_tax_before_winter_fuel_payment_charge: 1_486
     benunits:
       benunit:
         members: [person]
@@ -204,3 +204,30 @@
     # attributed to them. No NI above State Pension age.
     # 10,000 - 743 = 9,257. (Dividing by 15,000 would attribute 990.67.)
     housing_benefit_net_earnings: 9_257
+
+- name: The winter fuel payment charge does not come off earnings
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    people:
+      person:
+        age: 70
+        employment_income: 10_000
+        private_pension_income: 30_000
+    benunits:
+      benunit:
+        members: [person]
+    households:
+      household:
+        members: [person]
+        country: ENGLAND
+  output:
+    # Total income 40,000 exceeds £35,000, so the £200 Winter Fuel Payment is
+    # charged back (ITEPA 2003 s.681I). The charge recovers the payment; it
+    # is not tax deducted from the earnings (reg 36(3); pension age reg
+    # 36(2)). Income tax before it is (40,000 - 12,570) x 20% = 5,486, of
+    # which 10,000 / 40,000 is attributed to earnings: 1,371.50. No NI above
+    # State Pension age. 10,000 - 1,371.50 = 8,628.50.
+    winter_fuel_payment_charge: [200]
+    income_tax: [5_686]
+    housing_benefit_net_earnings: 8_628.50