Apply the Carer's Allowance earnings limit

[MaxGhenis]

Fixes #2309

axiom: ukpga/1992/4/70 + uksi/1976/409/8 TheAxiomFoundation/rulespec-uk#454 queued (the provisions are not yet in the corpus, and the signed encoder run needs its own approval)

What changes

Until now, Carer's Allowance was paid to anyone caring for 35 hours a week, whatever they earned. A person is not entitled on any day they are gainfully employed (SSCBA 1992 s. 70(1)(b)). Reg. 8(1) of SI 1976/409 treats them as gainfully employed when their earnings in the previous week exceed the limit: £204 from 6 April 2026 (SI 2026/218).

• gov.dwp.carers_allowance.earnings_limit: the weekly limit from 2015, each value cited to the instrument that set it. Values are taken from legislation.gov.uk's point-in-time versions of reg. 8.
• carers_allowance_earnings: net earnings under the Computation of Earnings Regulations 1996.
  • Employment (reg. 10(4)): pay less the income tax and primary Class 1 deducted from it. The law deducts the tax actually withheld; the model approximates it as PAYE on the pay alone with a standard code. That also avoids a cycle, since Carer's Allowance is taxable.
  • Self-employment (regs. 13(4) and 14): trading profit less a notional income tax at the basic rate (the Scottish basic rate for a Scottish taxpayer) on the profit above the full personal allowance, and Class 4 at the main rate between the profits limits. Reg. 14(1) deducts "the personal reliefs to which the claimant is entitled", with no reduction for allowance the pay uses. Capital expenditure is not deducted (reg. 13(6)(a)). Until 6 April 2024, reg. 14(2)(a) also deducted the Class 2 contributions payable on the chargeable profit. This uses the engine's Class 2 rules (class_2_liable, the year's contribution weeks) on the profit itself. Class 2's flat rate is nil from 2024-25, so 2026 is unchanged. The Scottish basic rate is read from the parameter tree's second Scottish bracket: the scale at an instant drops the null starter bracket of 2016-17 and 2017-18, where index 1 was the 40% higher rate.
  • Less half of pension contributions. A trading loss counts as nil.
  • Not modelled: the Sch. 3 care-charge deduction and the Sch. 1 disregards. The docstring says so.
• is_gainfully_employed_for_carers_allowance: weekly net earnings (annual ÷ 52, with a fraction of a penny disregarded under reg. 5) exceed the limit.
• carers_allowance_pre_overlap: no allowance when gainfully employed, including for reported recipients (reported receipt creates no exemption).
• is_carer_for_benefits: a reported Carer's Allowance award now counts as evidence of the caring itself. So a reported recipient whom the earnings limit stops being paid stays a carer for the Universal Credit carer element, which doesn't apply the limit (UC Regs 2013 reg. 30).

Rules that read Carer's Allowance entitlement now see none for a carer over the limit, as the law requires. These are the extended childcare partner exception and the Tax-Free Childcare caring-benefit exception.

Impact (real run)

Measured on enhanced_frs_2023_24.h5 (local policyengine-uk-data storage, 6 October build) for 2026, at head c4aa96c. The run uses this branch twice: as is, and with the earnings limit set to £1 trillion, which reproduces main for the allowance.

	Baseline	This PR	Change
Carer's Allowance	£4,522.4m	£4,345.0m	−£177.4m
Carer's Allowance recipients	1,006.6k	967.1k	−39.5k
Universal Credit	£62,156.8m	£62,200.5m	+£43.7m
Income Tax	£349,674.5m	£349,636.3m	−£38.2m (Carer's Allowance is taxable)
Household net income			−£95.4m

• Universal Credit: Carer's Allowance is unearned income for UC. When it stops, UC unearned income falls by exactly the £177.4m and UC rises by £43.7m. The UC carer element is unchanged (£2,669.0m both ways): carers over the limit keep it, because UC reg. 30 does not apply the earnings limit. The first head's run gave +£19.2m, because those carers then lost the carer element; review caught that.
• Unchanged: Pension Credit, Housing Benefit and Council Tax Reduction, at £0.1m precision.

Tests

• YAML (gov/dwp/carers_allowance_earnings_limit.yaml): 17 hand-worked cases, mostly for 2026-27, plus 2025-26 and 2018-19. They cover:

  • the boundary (£204.00 passes; £204.005 rounds to £204.00 and passes; £204.01 fails);
  • tax and NI on pay of £15,000;
  • half of pension contributions;
  • trading profit under reg. 14 (£60,000 takes £9,486 tax and £2,262 Class 4, not the progressive amounts);
  • personal pension contributions bringing trading earnings under the limit (£202.27 a week), with £5,000 of capital allowances that reg. 13(6)(a) does not deduct;
  • pay and profit each taking the full personal allowance (Case 15, £15,000);
  • pay of £6,000 and profit of £8,000 with £6,600 of personal pension contributions (Case 16): £205.76 a week, over the limit. Sharing one allowance would have given £200.27, under it;
  • a trading loss;
  • a reported recipient, who loses the allowance but stays a carer for UC;
  • unearned income;
  • 2018: £7,000 of profit with £1,400 of personal pension contributions gives £118.20 a week, under the £120 limit, once Class 2 is deducted (Case 17). Without Class 2 it would be £121.15.

• Changed existing tests:

  • One extended-childcare case described a working partner "entitled to Carer's Allowance" on pay of £20,000, which the law rules out. It now has pay of £8,400 and pension contributions of £3,100: £131.73 a week, under the limit.
  • One property test (test_council_tax_reduction_carer_income_properties.py) assumes the carer is always entitled. Its generated carer pay is now capped at £10,000 (£192 a week).

• Property and regression tests (test_carers_allowance_earnings_limit_properties.py, Hypothesis):

  • net earnings lie between nil and gross pay plus profit;
  • entitlement matches the penny-rounded net-earnings test exactly;
  • net earnings never fall as pay rises;
  • savings and pension income are not earnings (a modelling assumption of the PAYE approximation);
  • trading profit of £30,000 takes the 20% basic rate in 2016, 2017, 2018 and 2026, in England and Scotland, net of Class 2 before 2024-25. With the old index read, the Scotland 2016 and 2017 cases fail.

• Run locally at b934055:

  • the full policy YAML suite, 3,012 passed;
  • the carer-related Python tests, 171 passed.

• Reviews: three GPT-6.1 Sol reviews asked for changes, and all are addressed:

  • first: reg. 14 for self-employment, reg. 5 rounding, UC carer status, and wording;
  • second: the full personal allowance against profit, the Scottish basic-rate read, the capital allowances in Case 12, and wording;
  • third: the pre-2024 Class 2 deduction.

  The third review also noted the missing 2016-17 personal allowance, filed as Personal allowance for 2016-17 is £10,600; it was £11,000 #2359.

• Follow-up filed: Carer Support Payment has no earnings limit either: Carer Support Payment has no earnings limit (SSI 2023/302 reg. 14) #2345.

🤖 Generated with Claude Code

[MaxGhenis]

CI run cancelled to free runners (UK hub, 2026-10-11 23:30Z). The PolicyEngine org is at GitHub's limit of 60 concurrent jobs, with about 360 queued. Fleet ops asked the hub to let the Budget-critical #2305 take runners first. This PR's queued run had not started, so I cancelled it. Nothing is wrong with the PR.

Please don't re-run it or push just to retrigger CI. The hub re-runs this run itself once #2305 has runners. The record is ~/reviews/uk-hub/ci-yield-2026-10-11.json; see notice 17 in ~/reviews/uk-hub/notices.md.

[MaxGhenis]

Hand-off to the UK hub (session local_66e4b1fd, PolicyBench UK round 2).

• Head: 17d034a47df234d325a93946698024cc4e03cc61 (includes main at ed7b42f95).
• Review: GPT-6.1 Sol, four rounds, APPROVE at this head: ~/reviews/policybench-uk-round2/reviews/pe-uk-2312-review-r4.md. Earlier rounds' findings (shared personal allowance, Scottish basic rate index, pre-2024 Class 2) are fixed.
• CI: not yet run at this head. The run was queued, and the hub cancelled it to free runners (notice 17, ~/reviews/uk-hub/ci-yield-2026-10-11.json); the hub re-runs it. The last completed run, at c4aa96c5, failed one test only, main's test_dataframe_dataset round-trip (notice 14), with 5,054 others passing. This head includes main's fix for it (Export the identifiers for every year an input frame names, so it round-trips #2349).
• Local tests (~/reviews/policybench-uk-round2/fixes/evidence/), at the approved head before the main merge, which changed none of this PR's files (pr2312_b934055b_net.diff and pr2312_merged_net.diff are identical): 3,012 YAML cases and 171 carer Python tests (pr2312_r4_full_yaml.log, pr2312_r4_py.log).
• PolicyBench check at this head: all 2,800 round 2 references recomputed on this head (audit/attribution/refs_ca_final.csv); 22 move, the same cells and values as at the reviewed head. With all five fix heads merged onto main ed7b42f95, 96 move, also unchanged.
• Impact (enhanced FRS, 2026, in the PR body): Carer's Allowance −£177.4m, recipients 1,006.6k → 967.1k; UC +£43.7m; Income Tax −£38.2m.
• Depends on: nothing. No order constraint with Round the High Income Child Benefit Charge as s. 681C(3) requires #2323, Relieve a miscellaneous loss only against miscellaneous income #2327, Set the Personal Savings Allowance on rest-of-UK bands for Scottish taxpayers #2348 or Band savings and dividends above property income #2352 (the five merge together cleanly; combined engine run in ~/reviews/policybench-uk-round2/audit/attribution/).
• Decision: none. A bug fix to the law the PR cites.
• Follow-ups filed, not owed here: Carer's Allowance is paid for caring for someone with no qualifying disability benefit (SSCBA 1992 s. 70(1)-(2)) #2310 (cared-for person's qualifying benefit), Carer's Allowance is paid to carers in full-time education (SSCBA 1992 s. 70(3), SI 1976/409 reg. 5) #2311 (full-time students), Carer Support Payment has no earnings limit (SSI 2023/302 reg. 14) #2345 (Carer Support Payment earnings limit), Personal allowance for 2016-17 is £10,600; it was £11,000 #2359 (2016-17 personal allowance), Carer's Allowance earnings deduct notional Class 2 and Class 4 from carers over State Pension age #2360 (notional Class 2/4 over State Pension age). Axiom parity: rulespec-uk#454.