Count the 2022 Energy Bills Rebate in HBAI income, and apply the trading allowance to Chapter 8 miscellaneous income

changelog.d/2724.fixed.md

@@ -0,0 +1 @@
+Counted the 2022 Energy Bills Rebate (the Energy Bills Support Scheme credit and the £150 Council Tax Rebate) in HBAI household net income as miscellaneous income, as DWP's HBAI does, and paid the one-off Council Tax Rebate in 2022-23 only rather than again in 2023-24.

changelog.d/2725.fixed.md

@@ -0,0 +1 @@
+Applied the trading allowance to income not otherwise charged (ITTOIA 2005 Part 5 Chapter 8), sharing one allowance with trade receipts, through a new optional `income_not_otherwise_charged` input that defaults to zero. Means tests and gross income bases now read `miscellaneous_income_before_trading_allowance`, so the income tax relief does not reach them.

docs/book/programs/gov/treasury/cost-of-living-payments.md

@@ -2,31 +2,64 @@
 
 In response to the 2021-23 cost-of-living crisis the UK government
 announced two distinct one-off support packages. Both are modelled in
-PolicyEngine UK under `gov.treasury.*` and feed into household net
-income via [`gov_spending`](https://github.com/PolicyEngine/policyengine-uk/blob/main/policyengine_uk/variables/gov/gov_spending.py)
-and the HBAI benefit aggregates.
+PolicyEngine UK under `gov.treasury.*` and count in household net income
+and in [`gov_spending`](https://github.com/PolicyEngine/policyengine-uk/blob/main/policyengine_uk/variables/gov/gov_spending.py).
+Both also count in HBAI household net income, the income behind the poverty
+statistics, though under different HBAI headings (see below).
 
 ## Energy Bills Rebate (winter 2022)
 
 Announced by the Chancellor in February 2022 to help households with the
 spike in domestic energy prices. Two strands:
 
 - **£150 Council Tax Rebate** for households in Council Tax bands A–D in
-  England, paid in April 2022. Equivalent payments were made by the
-  devolved administrations.
-- **£200 Energy Bills Credit** delivered via energy suppliers to all
-  domestic electricity customers from October 2022. Originally announced
-  as a repayable loan, the repayment requirement was scrapped at the May
-  2022 emergency support package.
+  England, a one-off in 2022-23. Households qualified on their band on
+  1 April 2022, and billing authorities made every payment by 30 September
+  2022. The devolved administrations made equivalent payments.
+- **Energy Bills Support Scheme**, a £400 discount on domestic electricity
+  bills in Great Britain, paid in six monthly instalments from October 2022
+  to March 2023 (£66 for two months, then £67). Announced in February 2022
+  as a repayable £200, it became a £400 grant in the May 2022 support
+  package. Northern Ireland paid £400 in one go in January 2023, alongside
+  a £200 Alternative Fuel Payment that the model does not include.
 
 PolicyEngine models these via:
 
 - `energy_bills_rebate` (Household, YEAR) = `ebr_council_tax_rebate` +
   `ebr_energy_bills_credit`
 - Parameters at `parameters/gov/treasury/energy_bills_rebate/`:
-  - `energy_bills_credit.yaml` — the £200 flat household amount
+  - `energy_bills_credit_monthly.yaml` — the Great Britain monthly
+    instalments
+  - `energy_bills_credit_northern_ireland.yaml` — the Northern Ireland
+    payment in January 2023
+  - `energy_bills_credit.yaml` — a yearly top-up, zero by default, kept for
+    reforms
   - `council_tax_rebate/bands.yaml` — qualifying CT bands (A–D)
-  - `council_tax_rebate/amount.yaml` — the £150 rebate amount
+  - `council_tax_rebate/amount.yaml` — £150 in 2022-23 and nothing in any
+    other year
+
+`ebr_energy_bills_credit` sums the monthly instalments within each calendar
+year, so a Great Britain household on the scheme throughout gets £199 in
+2022 and £201 in 2023, while HBAI counts the whole £400 in 2022-23. Each
+month takes the scheme of the household's `country` in that calendar year.
+A situation that sets Northern Ireland for 2022 only therefore gets the
+Great Britain credit from January to March 2023, because `country` is not
+carried forward and defaults to England.
+
+HBAI classifies both strands as miscellaneous income, not state support,
+and DWP imputes receipt because the FRS did not ask about them. So
+`energy_bills_rebate` is in `hbai_household_net_income` but not in
+`hbai_benefits`. No FRS income field behind `miscellaneous_income` holds
+the rebates, so the model counts them once.
+
+HBAI income takes the same calendar-year sum as household net income and
+government spending. A Great Britain household in bands A to D on the
+scheme throughout gets £349 in 2022 and £201 in 2023, where HBAI counts
+£550 in 2022-23. Summing the credit by financial year would move all three
+measures together. `epg_subsidy` sums the Energy Price Guarantee by
+calendar year in the same way; it counts in household net income and
+government spending but not in HBAI income. The model keeps one timing for
+both schemes for now.
 
 ## Cost-of-Living Payments (2022-23 and 2023-24)
 
@@ -62,4 +95,5 @@ will collect all three payments. This matches the actual policy.
 - [HMT/DWP, May 2022 cost-of-living support package announcement](https://www.gov.uk/government/news/millions-of-most-vulnerable-households-will-receive-1200-of-help-with-cost-of-living)
 - DWP, [Cost-of-Living Payments 2023-24 guidance](https://www.gov.uk/guidance/cost-of-living-payments-2023-to-2024) (means-tested, pensioner and disability strands).
 - HMT, [Energy Bills Support Scheme](https://www.gov.uk/government/publications/the-energy-bills-support-scheme-explainer) and [Council Tax Energy Rebate](https://www.gov.uk/government/publications/the-council-tax-rebate-2022-23-billing-authority-guidance).
+- DWP, [HBAI quality and methodology information report, FYE 2023](https://www.gov.uk/government/statistics/households-below-average-income-for-financial-years-ending-1995-to-2023/households-below-average-income-series-quality-and-methodology-information-report-fye-2023) (treatment of the cost-of-living support schemes in HBAI income).
 - House of Commons Library briefing [CBP-9501 — Cost of Living Payments and the energy crisis](https://commonslibrary.parliament.uk/research-briefings/cbp-9501/).

policyengine_uk/data/uprating_indices.yaml

@@ -116,6 +116,8 @@ gov.economic_assumptions.yoy_growth.obr.per_capita.gdp:
 - lump_sum_income
 - maintenance_income
 - miscellaneous_income
+# Part of miscellaneous_income, so it grows with it.
+- income_not_otherwise_charged
 - mortgage_capital_repayment
 - net_financial_wealth
 - non_residential_property_value

policyengine_uk/parameters/gov/treasury/energy_bills_rebate/council_tax_rebate/amount.yaml

@@ -1,8 +1,20 @@
 description: Council Tax rebate paid to households in qualifying Council Tax bands under the Energy Bills Rebate.
+# A one-off £150 per household in 2022-23. Eligibility was fixed at the end of
+# 1 April 2022, and billing authorities had to make every payment by
+# 30 September 2022 (billing authority guidance, paragraphs 7, 14 and 19).
+# 2023-24 had no rebate.
 values:
   0001-01-01: 0
-  2022-01-01: 150
-  2023-10-01: 0
+  2022-04-01:
+    value: 150
+    reference:
+      - title: The Council Tax Rebate 2022-23 billing authority guidance, paragraphs 7, 14 and 19
+        href: https://www.gov.uk/government/publications/the-council-tax-rebate-2022-23-billing-authority-guidance/support-for-energy-bills-the-council-tax-rebate-2022-23-billing-authority-guidance
+  2022-10-01:
+    value: 0
+    reference:
+      - title: The Council Tax Rebate 2022-23 billing authority guidance, paragraph 7 (payments made by 30 September 2022)
+        href: https://www.gov.uk/government/publications/the-council-tax-rebate-2022-23-billing-authority-guidance/support-for-energy-bills-the-council-tax-rebate-2022-23-billing-authority-guidance
 metadata:
   unit: currency-GBP
   period: year

policyengine_uk/parameters/gov/welsh_government/childcare_offer/income/gross_income_sources.yaml

@@ -61,7 +61,7 @@ values:
   # education_grants residual can still hold Childcare Grant and Disabled
   # Students' Allowance, because the dataset moves those out only through
   # England-only formulas; and the FRS allpay2 amount reaches both
-  # taxable_miscellaneous_income and private_transfer_income
+  # miscellaneous_income_before_trading_allowance and private_transfer_income
   # (policyengine-uk-data#627).
   2019-08-01:
     - employment_income
@@ -92,6 +92,6 @@ values:
     - savings_interest_income
     - other_investment_income
     - dividend_income
-    - taxable_miscellaneous_income
+    - miscellaneous_income_before_trading_allowance
     - maintenance_income
     - spousal_maintenance_income

policyengine_uk/tests/policy/baseline/gov/hmrc/income_tax/allowances/miscellaneous_income_trading_allowance_deduction.yaml

@@ -0,0 +1,235 @@
+# The trading allowance on miscellaneous income, ITTOIA 2005 Part 6A
+# Chapter 1. Relief covers the income of a relevant trade and "miscellaneous
+# income" (s. 783A(1)): income chargeable under Part 5 Chapter 8, income not
+# otherwise charged, before expenses (s. 783AB). One allowance covers both
+# (s. 783AC, "relevant income").
+# - Full relief: relevant income within the allowance is not charged
+#   (ss. 783AE, 783AF and 783AG).
+# - Partial relief, by election above the allowance: each source less its
+#   share of the allowance, the shares adding up to the allowance and chosen
+#   by the person, with no expenses (ss. 783AI-783AK).
+# income_not_otherwise_charged is the part of miscellaneous_income that is
+# Chapter 8 income. 2026-27: trading allowance £1,000 (s. 783AD), personal
+# allowance £12,570, basic rate 20%.
+
+- name: Case 1, casual income within the allowance is fully relieved.
+  period: 2026
+  absolute_error_margin: 0
+  input:
+    miscellaneous_income: 800
+    income_not_otherwise_charged: 800
+  output:
+    miscellaneous_income_trading_allowance_deduction: 800
+    taxable_miscellaneous_income: 0
+    uses_trading_allowance: true
+
+- name: Case 2, above the allowance, £1,000 comes off.
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    employment_income: 30_000
+    miscellaneous_income: 2_000
+    income_not_otherwise_charged: 2_000
+  output:
+    miscellaneous_income_trading_allowance_deduction: 1_000
+    taxable_miscellaneous_income: 1_000
+    # (30,000 + 1,000 - 12,570) x 20%
+    income_tax: 3_686
+
+- name: Case 3, the same tax as £2,000 of trade receipts with no expenses.
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    employment_income: 30_000
+    self_employment_gross_receipts: 2_000
+    self_employment_income: 2_000
+  output:
+    trading_allowance_deduction: 1_000
+    income_tax: 3_686
+
+- name: Case 4, miscellaneous income outside Chapter 8 gets no allowance.
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    employment_income: 30_000
+    miscellaneous_income: 2_000
+  output:
+    miscellaneous_income_trading_allowance_deduction: 0
+    taxable_miscellaneous_income: 2_000
+    uses_trading_allowance: false
+    # (30,000 + 2,000 - 12,570) x 20%
+    income_tax: 3_886
+
+- name: Case 5, trade and casual income share one allowance.
+  period: 2026
+  absolute_error_margin: 0
+  input:
+    # Receipts unknown: a profit within the allowance is taken as receipts
+    # of £600, leaving £400 of the allowance.
+    self_employment_income: 600
+    miscellaneous_income: 900
+    income_not_otherwise_charged: 900
+  output:
+    trading_allowance_deduction: 600
+    taxable_self_employment_income: 0
+    miscellaneous_income_trading_allowance_deduction: 400
+    taxable_miscellaneous_income: 500
+
+- name: Case 6, receipts of £800 and casual income of £150 are within the allowance together.
+  period: 2026
+  absolute_error_margin: 0
+  input:
+    self_employment_gross_receipts: 800
+    self_employment_income: 500
+    miscellaneous_income: 150
+    income_not_otherwise_charged: 150
+  output:
+    trading_allowance_deduction: 500
+    miscellaneous_income_trading_allowance_deduction: 150
+    taxable_self_employment_income: 0
+    taxable_miscellaneous_income: 0
+
+- name: Case 7, trade receipts above the allowance take all of it.
+  period: 2026
+  absolute_error_margin: 0
+  input:
+    # £300 of expenses: receipts less the allowance (£4,000) beats profit
+    # (£4,700), and the trade uses the whole allowance.
+    self_employment_gross_receipts: 5_000
+    self_employment_income: 4_700
+    miscellaneous_income: 900
+    income_not_otherwise_charged: 900
+  output:
+    trading_allowance_deduction: 700
+    taxable_self_employment_income: 4_000
+    miscellaneous_income_trading_allowance_deduction: 0
+    taxable_miscellaneous_income: 900
+
+- name: Case 8, partial relief would cost the trade more in expenses than it saves.
+  period: 2026
+  absolute_error_margin: 0
+  input:
+    # £1,500 of expenses: partial relief would charge receipts plus casual
+    # income less the allowance, £4,900, against £3,500 + £900 = £4,400.
+    self_employment_gross_receipts: 5_000
+    self_employment_income: 3_500
+    miscellaneous_income: 900
+    income_not_otherwise_charged: 900
+  output:
+    trading_allowance_deduction: 0
+    miscellaneous_income_trading_allowance_deduction: 0
+    taxable_miscellaneous_income: 900
+    uses_trading_allowance: false
+
+- name: Case 9, Chapter 8 income counts only up to miscellaneous income.
+  period: 2026
+  absolute_error_margin: 0
+  input:
+    miscellaneous_income: 500
+    income_not_otherwise_charged: 2_000
+  output:
+    miscellaneous_income_trading_allowance_deduction: 500
+    taxable_miscellaneous_income: 0
+
+- name: Case 10, a larger current trading loss is claimed instead, and the casual income is taxed.
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    employment_income: 30_000
+    trading_loss: 5_000
+    miscellaneous_income: 800
+    income_not_otherwise_charged: 800
+  output:
+    uses_trading_allowance: false
+    miscellaneous_income_trading_allowance_deduction: 0
+    taxable_miscellaneous_income: 800
+    trade_loss_relief_against_general_income: 5_000
+    # (30,000 + 800 - 5,000 - 12,570) x 20%
+    income_tax: 2_646
+
+- name: Case 11, full relief on casual income makes a smaller current trading loss nil.
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    employment_income: 30_000
+    trading_loss: 500
+    miscellaneous_income: 800
+    income_not_otherwise_charged: 800
+  output:
+    # Full relief saves £800 of income against a £500 loss (s. 783AF makes
+    # the trade's loss nil). Without receipts, the loss-making trade is
+    # taken to have none, so the casual income alone is relevant income.
+    uses_trading_allowance: true
+    miscellaneous_income_trading_allowance_deduction: 800
+    trade_loss_relief_against_general_income: 0
+    # (30,000 - 12,570) x 20%
+    income_tax: 3_486
+
+- name: Case 12, means tests read the income before the allowance.
+  period: 2026
+  absolute_error_margin: 0
+  input:
+    miscellaneous_income: 2_000
+    income_not_otherwise_charged: 2_000
+  output:
+    miscellaneous_income_before_trading_allowance: 2_000
+    taxable_miscellaneous_income: 1_000
+    gross_taxable_inputs: 2_000
+
+- name: Case 13, no trading allowance before 2017-18.
+  period: 2016
+  absolute_error_margin: 0
+  input:
+    miscellaneous_income: 800
+    income_not_otherwise_charged: 800
+  output:
+    miscellaneous_income_trading_allowance_deduction: 0
+    taxable_miscellaneous_income: 800
+
+- name: Case 14, losses brought forward do not move the allowance from the trade.
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    employment_income: 30_000
+    self_employment_gross_receipts: 800
+    self_employment_income: 800
+    loss_relief: 800
+    miscellaneous_income: 800
+    income_not_otherwise_charged: 800
+  output:
+    # Relevant income of £1,600 is above the allowance. The trade takes its
+    # receipts' worth of it (£800) and the casual income the other £200
+    # (s. 783AK). The trade's profit is then nil, so none of the £800 loss
+    # is used this year; it carries forward (ITA 2007 ss. 83 and 84). The Act
+    # would also allow £200 for the trade and £800 for the casual income:
+    # £3,486 of tax now, using £600 of the loss.
+    trading_allowance_deduction: 800
+    miscellaneous_income_trading_allowance_deduction: 200
+    taxable_self_employment_income: 0
+    taxable_miscellaneous_income: 600
+    # (30,000 + 600 - 12,570) x 20%
+    income_tax: 3_606
+
+- name: Case 15, the trade takes the allowance even where pension relief would rise without it.
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    self_employment_gross_receipts: 20_000
+    self_employment_income: 20_000
+    miscellaneous_income: 30_000
+    income_not_otherwise_charged: 30_000
+    personal_pension_contributions: 20_000
+  output:
+    # The trade's receipts of £20,000 exceed the allowance, so the trade
+    # takes all £1,000 of it and the casual income none (s. 783AK). Trade
+    # profit of £19,000 is the relevant UK earnings that cap pension relief
+    # (FA 2004 s. 189), so £19,000 of the £20,000 contributions get relief.
+    # The Act would also allow the casual income the whole allowance: relief
+    # on all £20,000 and £3,286 of income tax, but £445.80 of Class 4.
+    trading_allowance_deduction: 1_000
+    miscellaneous_income_trading_allowance_deduction: 0
+    pension_contributions_relief: 19_000
+    # (19,000 + 30,000 - 19,000 - 12,570) x 20%
+    income_tax: 3_486
+    # (19,000 - 12,570) x 6%
+    ni_class_4: 385.80