Charge income tax on statutory paternity pay

changelog.d/2367.fixed.md

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+- Charged income tax on statutory paternity pay, which ITEPA 2003 s. 660 Table A lists as taxable with statutory sick and maternity pay, and counted it as earnings in Housing Benefit and Council Tax Reduction income, so the tax on it does not raise those awards.

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

@@ -127,3 +127,27 @@
     housing_benefit_applicable_income_childcare_element: 0
   output:
     housing_benefit_applicable_income: 0
+
+- name: Statutory paternity pay counts as income and the income tax on it comes off
+  # SI 2006/213 reg 35(1)(i): statutory paternity pay is earnings. ITEPA 2003
+  # s. 660 taxes it, and reg 36(3) deducts the income tax and Class 1 NI on
+  # the earnings. 2026: two weeks at £194.32 is 388.64.
+  # Income tax 0.2 x (20,388.64 - 12,570) = 1,563.728.
+  # NI 0.08 x (20,388.64 - 12,569.96) = 625.4944.
+  # Sch 4 para 10 disregards £5 a week of a single claimant's earnings: 260.
+  # 20,388.64 - 1,563.728 - 625.4944 - 260 = 17,939.4176.
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    people:
+      person:
+        age: 30
+        employment_income: 20_000
+        statutory_paternity_pay: 388.64
+    benunits:
+      benunit:
+        members: [person]
+        would_claim_uc: false  # not on Universal Credit, which passports the means test
+  output:
+    housing_benefit_applicable_income_disregard: 260
+    housing_benefit_applicable_income: 17_939.42

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

@@ -204,3 +204,38 @@
     # 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: Statutory paternity pay is earnings, and the income tax on it is deducted
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    people:
+      person:
+        age: 30
+        employment_income: 20_000
+        statutory_paternity_pay: 388.64 # two weeks at £194.32
+    benunits:
+      benunit:
+        members: [person]
+  output:
+    # SI 2006/213 reg 35(1)(i). ITEPA 2003 s. 660 taxes the payment.
+    # Income tax 0.2 x (20,388.64 - 12,570) = 1,563.728.
+    # NI 0.08 x (20,388.64 - 12,569.96) = 625.4944.
+    # 20,388.64 - 1,563.728 - 625.4944 = 18,199.4176.
+    housing_benefit_net_earnings: 18_199.42
+
+- name: Statutory paternity pay is earnings at pension age
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    people:
+      person:
+        age: 70
+        statutory_paternity_pay: 388.64
+    benunits:
+      benunit:
+        members: [person]
+  output:
+    # SI 2006/214 reg 35(1)(i). Within the personal allowance, and no NI
+    # above State Pension age.
+    housing_benefit_net_earnings: 388.64

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

@@ -535,6 +535,27 @@
     housing_benefit_specified_or_temporary_accommodation_disregard: 4_041.96
     housing_benefit_applicable_income_disregard: 4_301.96 # (£5 + £77.73) × 52
 
+- name: Statutory paternity pay alone makes the claimant an employed earner
+  period: 2027
+  absolute_error_margin: 0.01
+  input:
+    people:
+      person:
+        age: 30
+        statutory_paternity_pay: 388.64 # earnings under reg 35(1)(i)
+    benunits:
+      benunit:
+        would_claim_uc: false  # not on Universal Credit, which passports the means test
+        members: [person]
+        in_specified_or_temporary_accommodation: true
+  output:
+    housing_benefit_net_earnings: 388.64
+    # Para 18(1)(b) is met, so the full amount applies...
+    housing_benefit_specified_or_temporary_accommodation_disregard: 4_041.96
+    # ...but the disregards, (£5 + £77.73) x 52 = 4,301.96, come off net
+    # earnings of 388.64.
+    housing_benefit_applicable_income_disregard: 388.64
+
 - name: A self-employment loss is still self-employment, but leaves no earnings to disregard
   period: 2027
   absolute_error_margin: 0.01

policyengine_uk/tests/policy/baseline/gov/hmrc/income_tax/bases/employment_benefits.yaml

@@ -0,0 +1,59 @@
+# ITEPA 2003 s. 660(1) Table A lists statutory sick pay, statutory maternity
+# pay and statutory paternity pay as taxable UK benefits. 2026-27: statutory
+# paternity pay £194.32 a week (SI 2002/2818 reg 2(a), as substituted by SI
+# 2026/148 art 10(1)(a)), so two weeks is £388.64. Personal allowance
+# £12,570, basic rate 20% to £50,270 and higher rate 40% above it
+# (gov.uk/income-tax-rates). No region is set, so the rest of UK rates apply.
+
+- name: Statutory sick, maternity and paternity pay are employment benefits
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    statutory_sick_pay: 1_232.50 # 10 weeks at £123.25
+    statutory_maternity_pay: 3_000
+    statutory_paternity_pay: 388.64
+  output:
+    employment_benefits: 4_621.14 # 1,232.50 + 3,000 + 388.64
+
+- name: Two weeks of statutory paternity pay are taxed with wages
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    employment_income: 30_000
+    statutory_paternity_pay: 388.64
+  output:
+    taxable_employment_income: 30_388.64
+    # 0.2 x (30,388.64 - 12,570) = 3,563.728: 3,486 on the wages and 77.728,
+    # 20% of 388.64, on the statutory paternity pay.
+    income_tax: 3_563.73
+
+- name: Statutory paternity pay above the basic rate limit is taxed at the higher rate
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    employment_income: 60_000
+    statutory_paternity_pay: 388.64
+  output:
+    # 0.2 x (50,270 - 12,570) + 0.4 x (60,388.64 - 50,270)
+    # = 7,540 + 4,047.456 = 11,587.456.
+    income_tax: 11_587.46
+
+- name: Statutory paternity pay within the personal allowance bears no income tax
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    statutory_paternity_pay: 388.64
+  output:
+    taxable_employment_income: 388.64
+    income_tax: 0
+
+- name: Statutory paternity pay is taxed as the same amount of statutory sick pay is
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    employment_income: 30_000
+    statutory_sick_pay: 388.64
+  output:
+    # The same as two weeks of statutory paternity pay on these wages.
+    taxable_employment_income: 30_388.64
+    income_tax: 3_563.73

policyengine_uk/tests/policy/baseline/gov/local_authorities/council_tax_reduction/council_tax_reduction_statutory_pay.yaml

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+# Statutory paternity pay in Council Tax Reduction income. Every scheme counts
+# statutory sick, maternity and paternity pay as earnings: SI 2012/2885 Sch 1
+# para 18(1)(h) to (j) and the default scheme, SI 2012/2886 Sch para 51(1)(j);
+# WSI 2013/3029 Sch 1 para 12(1)(h) and (i) and Sch 6 para 14(1)(j); SSI
+# 2012/319 reg 32(1)(h) and (i); SSI 2021/249 regs 49(4) and 50(2)(j). ITEPA
+# 2003 s. 660 taxes them, and the schemes take the income tax and Class 1 NI
+# deducted from earnings off them (for example SI 2012/2885 Sch 1 para
+# 19(2)(a)). The model deducts all of a person's income tax and NI, and
+# counts no working-age earnings disregard.
+#
+# 2026: statutory paternity pay £194.32 a week (SI 2002/2818 reg 2(a)), so
+# two weeks is 388.64. Personal allowance 12,570 and basic rate 20%; NI
+# primary threshold 241.73 x 52 = 12,569.96 and main rate 8%.
+
+- name: Statutory paternity pay counts as working-age Council Tax Reduction income
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    people:
+      person:
+        age: 30
+        employment_income: 20_000
+        statutory_paternity_pay: 388.64
+    benunits:
+      benunit:
+        members: [person]
+        would_claim_uc: false
+    households:
+      household:
+        members: [person]
+        country: ENGLAND
+  output:
+    # Income tax 0.2 x (20,388.64 - 12,570) = 1,563.728.
+    # NI 0.08 x (20,388.64 - 12,569.96) = 625.4944.
+    # 20,388.64 - 1,563.728 - 625.4944 = 18,199.4176.
+    council_tax_reduction_applicable_income: 18_199.42
+
+- name: Statutory paternity pay counts as the same amount of statutory sick pay does
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    people:
+      person:
+        age: 30
+        employment_income: 20_000
+        statutory_sick_pay: 388.64
+    benunits:
+      benunit:
+        members: [person]
+        would_claim_uc: false
+    households:
+      household:
+        members: [person]
+        country: ENGLAND
+  output:
+    council_tax_reduction_applicable_income: 18_199.42