Classify the Budget helper variables in the fiscal partition

changelog.d/2762.fixed.md

@@ -0,0 +1 @@
+Classified the Budget 2026 helper variables in the fiscal partition.

policyengine_uk/data/fiscal_partition.yaml

@@ -50,9 +50,13 @@
 #     kind: component (summed or read inside `head`), measure_within (an
 #     analytical decomposition already inside `head` through its inputs),
 #     composite (spans several heads), duplicate (same value as `head`),
-#     baseline_measure, assessment (a tax amount worked out for a means test,
-#     a ceiling or a record, not a payment), change_measure (a wage change
-#     that already sits inside the incomes a head taxes).
+#     baseline_measure, assessment (an amount worked out for a means test, a
+#     benefit's eligibility or taper, a tax base, election, ceiling or record,
+#     not a payment), change_measure (a wage change that already sits inside
+#     the incomes a head taxes).
+#   spending_exclusions[]: components and assessments within spending heads,
+#     with the same variable, kind, head and note fields as exclusions. These
+#     are not additional payments alongside the named spending head.
 #   model_double_counts[]: known violations still in the model: a variable a
 #     total lists although the head variable `contained_in` already adds it.
 #     None since the #2159 fix gave corporate_sdlt its own head.
@@ -723,6 +727,10 @@ exclusions:
   - {variable: other_tax_credits, kind: component, head: income_tax, note: "A tax reduction, subtracted inside income_tax."}
   - {variable: property_finance_cost_relief, kind: component, head: income_tax, note: "A tax reduction, subtracted inside income_tax."}
   - {variable: pension_tax_allowance, kind: component, head: income_tax, note: "A tax reduction, subtracted inside income_tax."}
+  - {variable: miscellaneous_income_trading_allowance_deduction, kind: assessment, head: income_tax, note: "Trading allowance relief on a tax base, deducted inside taxable_miscellaneous_income; not a separate tax reduction or payment."}
+  - {variable: uses_trading_allowance, kind: assessment, head: income_tax, note: "The election between trading allowance relief and ordinary treatment, not a monetary amount."}
+  - {variable: miscellaneous_income_before_trading_allowance, kind: assessment, head: income_tax, note: "The gross miscellaneous income base used by income tax and means tests, not an additional receipt."}
+  - {variable: income_not_otherwise_charged, kind: assessment, head: income_tax, note: "The part of miscellaneous_income eligible for trading allowance relief, already within that income base."}
   - {variable: basic_rate_earned_income_tax, kind: assessment, head: income_tax, note: "Earned income tax by band; earned_income_tax does not read it."}
   - {variable: higher_rate_earned_income_tax, kind: assessment, head: income_tax, note: "As above."}
   - {variable: add_rate_earned_income_tax, kind: assessment, head: income_tax, note: "As above."}
@@ -766,13 +774,19 @@ exclusions:
   - {variable: pool_betting_duty, kind: component, head: gambling_duty}
   - {variable: remote_gaming_duty, kind: component, head: gambling_duty}
   - {variable: machine_games_duty, kind: component, head: gambling_duty}
+  - {variable: machine_games_standard_rate_higher_stake_net_takings, kind: component, head: gambling_duty, note: "A subset of the standard-rate machine-games tax base, read inside machine_games_duty; not additional net takings or a separate receipt."}
   - {variable: gaming_duty, kind: component, head: gambling_duty}
   - {variable: bingo_duty, kind: component, head: gambling_duty}
   - {variable: lottery_duty, kind: component, head: gambling_duty}
   - {variable: car_vehicle_excise_duty, kind: component, head: vehicle_excise_duty}
   # Council tax net of a benefit
   - {variable: council_tax_less_benefit, kind: composite, spans: [council_tax], note: "Council tax net of Council Tax Reduction (the OBR's basis). The totals count gross council tax and credit the reduction as spending, so adding this would count council tax twice."}
 
+spending_exclusions:
+  - {variable: carers_allowance_weekly_earnings_above_limit, kind: assessment, head: carers_allowance, note: "Weekly earnings excess used for eligibility and the earnings taper, not an additional benefit payment."}
+  - {variable: ebr_alternative_fuel_payment, kind: component, head: energy_bills_rebate, note: "The annual Alternative Fuel Payment already included in energy_bills_rebate."}
+  - {variable: monthly_ebr_alternative_fuel_payment, kind: component, head: energy_bills_rebate, note: "Monthly payments summed into ebr_alternative_fuel_payment, already included in energy_bills_rebate."}
+
 model_double_counts: []
 
 overlap_guards:

policyengine_uk/parameters/gov/hmrc/income_tax/allowances/trading_allowance.yaml

@@ -14,8 +14,7 @@ values:
         href: https://www.legislation.gov.uk/ukpga/2017/32/schedule/3
   # Budget 2026 raises the allowance to £3,000 from 6 April 2027, to be
   # legislated in Finance Bill 2026-27. The s. 783AD amount also relieves
-  # miscellaneous income (s. 783AB); the model applies it to trading income
-  # and to Chapter 8 miscellaneous income (income_not_otherwise_charged).
+  # miscellaneous income (s. 783AB); the model shares it between both sources.
   2027-04-06:
     value: 3_000
     reference:

policyengine_uk/tests/aggregate_impact/test_aggregate_impact_partition.py

@@ -85,6 +85,76 @@ def test_receipts_and_spending_are_separate(shipped):
         assert not set(head.totals) & {"gov_tax", "household_tax"}
 
 
+def test_spending_exclusions_name_known_variables_and_spending_heads(raw, system):
+    spending_heads = {head["id"] for head in raw["spending_heads"]}
+    head_variables = {
+        head["variable"] for head in raw["tax_heads"] + raw["spending_heads"]
+    }
+    exclusions = raw["exclusions"] + raw["spending_exclusions"]
+    excluded_variables = [entry["variable"] for entry in exclusions]
+    assert len(excluded_variables) == len(set(excluded_variables))
+    assert not head_variables & set(excluded_variables)
+    for entry in raw["spending_exclusions"]:
+        assert entry["variable"] in system.variables, entry
+        assert entry["head"] in spending_heads, entry
+        assert entry["kind"] in {"component", "assessment"}, entry
+        assert entry["note"], entry
+
+
+def test_the_reader_loads_the_spending_exclusions(raw, shipped):
+    assert [entry.variable for entry in shipped.spending_exclusions] == [
+        entry["variable"] for entry in raw["spending_exclusions"]
+    ]
+
+
+@pytest.mark.parametrize("head", ["no_such_head", "income_tax"])
+def test_a_spending_exclusion_must_name_a_spending_head(raw, head):
+    partition = copy.deepcopy(raw)
+    partition["spending_exclusions"][0]["head"] = head
+    with pytest.raises(PartitionError, match="needs a spending head"):
+        parse_partition(partition)
+
+
+def test_a_spending_exclusion_cannot_name_a_head_variable(raw):
+    partition = copy.deepcopy(raw)
+    partition["spending_exclusions"][0]["variable"] = raw["spending_heads"][0][
+        "variable"
+    ]
+    with pytest.raises(PartitionError, match="also a head variable"):
+        parse_partition(partition)
+
+
+def test_budget_and_energy_support_variables_have_fiscal_classifications(raw):
+    # These tax, earnings and payment helpers must have an explicit owner;
+    # adding a head for a component would count the same receipt twice.
+    variables = {
+        "carers_allowance_weekly_earnings_above_limit",
+        "pension_tax_allowance",
+        "household_energy_payment",
+        "miscellaneous_income_trading_allowance_deduction",
+        "uses_trading_allowance",
+        "miscellaneous_income_before_trading_allowance",
+        "income_not_otherwise_charged",
+        "income_tax_charges",
+        "income_tax_reductions",
+        "machine_games_standard_rate_higher_stake_net_takings",
+        "ebr_alternative_fuel_payment",
+        "monthly_ebr_alternative_fuel_payment",
+    }
+    classified = [
+        entry["variable"]
+        for section in (
+            "tax_heads",
+            "spending_heads",
+            "exclusions",
+            "spending_exclusions",
+        )
+        for entry in raw[section]
+    ]
+    assert variables <= set(classified)
+    assert all(classified.count(variable) == 1 for variable in variables)
+
+
 def test_dropped_when_matches_the_council_tax_abolition_formulas(shipped):
     switch = "gov.contrib.abolish_council_tax"
     assert shipped.dropped("gov_tax", [switch]) == {
@@ -114,11 +184,12 @@ def _remove_head(raw, head_id):
         for head in out[key]:
             if head.get("reads"):
                 head["reads"] = [r for r in head["reads"] if r.get("head") != head_id]
-    out["exclusions"] = [
-        e
-        for e in out.get("exclusions") or []
-        if e.get("head") != head_id and head_id not in (e.get("spans") or [])
-    ]
+    for key in ("exclusions", "spending_exclusions"):
+        out[key] = [
+            e
+            for e in out.get(key) or []
+            if e.get("head") != head_id and head_id not in (e.get("spans") or [])
+        ]
     out["model_double_counts"] = [
         d
         for d in out.get("model_double_counts") or []

policyengine_uk/tests/policy/reforms/oct_2026_budget/trading_allowance_miscellaneous_income.yaml

@@ -0,0 +1,33 @@
+# #2735 shares the allowance between trade receipts and Chapter 8 income;
+# the Budget 2026 increase must reach that same shared allowance in 2027.
+- name: Before the Budget increase one allowance covers trade and miscellaneous income
+  period: 2026
+  input:
+    age: 40
+    self_employment_gross_receipts: 2_000
+    self_employment_income: 1_500
+    miscellaneous_income: 2_000
+    income_not_otherwise_charged: 2_000
+  output:
+    trading_allowance_deduction: 500
+    miscellaneous_income_trading_allowance_deduction: 0
+    taxable_self_employment_income: 1_000
+    taxable_miscellaneous_income: 2_000
+    miscellaneous_income_before_trading_allowance: 2_000
+    uses_trading_allowance: true
+
+- name: The Budget increase gives miscellaneous income the part of 3000 trade receipts leave
+  period: 2027
+  input:
+    age: 40
+    self_employment_gross_receipts: 2_000
+    self_employment_income: 1_500
+    miscellaneous_income: 2_000
+    income_not_otherwise_charged: 2_000
+  output:
+    trading_allowance_deduction: 1_500
+    miscellaneous_income_trading_allowance_deduction: 1_000
+    taxable_self_employment_income: 0
+    taxable_miscellaneous_income: 1_000
+    miscellaneous_income_before_trading_allowance: 2_000
+    uses_trading_allowance: true

policyengine_uk/tests/test_carers_allowance_earnings_taper.py

@@ -221,7 +221,7 @@ def final_allowance(weekly_earnings, weekly_state_pension, year, region="NORTH_W
 
 
 def test_2030_31_takes_overlapping_benefits_off_only_the_taper_weeks():
-    # £250 a week is £46 over the £204 limit; £40 a week of State Pension.
+    # £250 a week exceeds the projected limit; £40 a week of State Pension.
     limit, rate = ca_parameters(START_YEAR)
     excess = 250 - limit
     expected = START_YEAR_SHARE * max(rate - excess - 40, 0) * 52

policyengine_uk/tests/test_income_tax_step_6_step_7_properties.py

@@ -58,6 +58,7 @@
 from policyengine_uk import Simulation
 from policyengine_uk.model_api import GBP, YEAR as YEAR_PERIOD, Person, Variable
 from policyengine_uk.model_api import add, max_, min_
+from policyengine_uk.utils.income_tax_reductions import earlier_tax_reductions
 
 pytestmark = pytest.mark.usefixtures("cloned_uk_tax_benefit_system")
 
@@ -445,3 +446,116 @@ def test_the_step_lists_are_disjoint_and_hold_the_modelled_provisions():
     every = step_5 + step_6 + step_7
     assert len(every) == len(set(every))
     assert all(variable in system.variables for variable in every)
+
+
+@pytest.mark.parametrize("year", [2026, 2027, 2028, 2029, 2030])
+def test_step_6_puts_the_pension_tax_allowance_after_every_other_reduction(sim, year):
+    income_tax = sim.tax_benefit_system.parameters(year).gov.hmrc.income_tax
+    reductions = list(income_tax.step_6_tax_reductions)
+    assert reductions[-1] == "pension_tax_allowance"
+    for index, reduction in enumerate(reductions):
+        assert earlier_tax_reductions(income_tax, reduction) == reductions[:index]
+
+
+PENSION_ALLOWANCE_YEARS = [2027, 2028, 2029]
+
+
+@pytest.fixture(scope="module")
+def pension_age_landlords():
+    # Elect actual expenses on a valid property-income route so both reliefs
+    # can apply. These pensioners have income at or just above each year's
+    # Pension Tax Allowance threshold, with small or tax-exhausting finance
+    # costs, some other tax credits, and English or Scottish income tax.
+    cases = [
+        (excess, finance_costs, credits, region)
+        for excess in (0, 50)
+        for finance_costs in (100, 1_000)
+        for credits in (0, 25)
+        for region in ("LONDON", "SCOTLAND")
+    ]
+    people = {
+        f"landlord_{i}": {
+            variable: {year: value for year in PENSION_ALLOWANCE_YEARS}
+            for variable, value in {
+                "age": 70,
+                "private_pension_income": 0,
+                "property_rental_income": 4_000,
+                "property_income": 2_000,
+                "property_finance_costs": finance_costs,
+                "other_tax_credits": credits,
+                "uses_property_allowance": False,
+            }.items()
+        }
+        for i, (_, finance_costs, credits, _) in enumerate(cases)
+    }
+    simulation = Simulation(
+        situation={
+            "people": people,
+            "benunits": {
+                f"benunit_{i}": {"members": [f"landlord_{i}"]}
+                for i in range(len(cases))
+            },
+            "households": {
+                f"household_{i}": {
+                    "members": [f"landlord_{i}"],
+                    "region": {year: region for year in PENSION_ALLOWANCE_YEARS},
+                }
+                for i, (_, _, _, region) in enumerate(cases)
+            },
+        }
+    )
+    for year in PENSION_ALLOWANCE_YEARS:
+        parameters = simulation.tax_benefit_system.parameters(year)
+        threshold = 52 * parameters.gov.dwp.state_pension.new_state_pension.amount
+        simulation.set_input(
+            "private_pension_income",
+            year,
+            [threshold + excess - 2_000 for excess, _, _, _ in cases],
+        )
+    return simulation
+
+
+@pytest.mark.parametrize("year", PENSION_ALLOWANCE_YEARS)
+def test_step_6_stays_within_step_5_with_the_pension_tax_allowance(
+    pension_age_landlords, year
+):
+    simulation = pension_age_landlords
+    simulation.reset_calculations()
+    income_tax = simulation.tax_benefit_system.parameters(year).gov.hmrc.income_tax
+    assert income_tax.reliefs.pension_tax_allowance.in_effect
+    reductions = {
+        variable: simulation.calculate(variable, year).astype(float)
+        for variable in income_tax.step_6_tax_reductions
+    }
+    pension_allowance = reductions["pension_tax_allowance"]
+    finance_relief = reductions["property_finance_cost_relief"]
+    # Both reductions are exercised together, including a binding tax cap.
+    assert ((pension_allowance > 0) & (finance_relief > 0)).any()
+    step_5 = simulation.calculate("income_tax_pre_charges", year).astype(float)
+    step_6 = simulation.calculate("income_tax_reductions", year).astype(float)
+    listed_reductions = sum(reductions.values())
+    tol = tolerance(step_5)
+    assert (listed_reductions <= step_5 + tol).all()
+    assert (step_6 <= step_5 + tol).all()
+    assert (np.abs(step_6 - listed_reductions) <= tol).all()
+    assert (np.abs(step_6 - step_5) <= tol).any()
+
+
+@pytest.mark.parametrize("year", PENSION_ALLOWANCE_YEARS)
+def test_pension_and_finance_cost_reductions_calculate_in_either_order(
+    pension_age_landlords, year
+):
+    simulation = pension_age_landlords
+    reductions = ("pension_tax_allowance", "property_finance_cost_relief")
+    results = []
+    for order in (reductions, reductions[::-1]):
+        simulation.reset_calculations()
+        results.append(
+            {name: simulation.calculate(name, year).copy() for name in order}
+        )
+    for reduction in reductions:
+        np.testing.assert_array_equal(results[0][reduction], results[1][reduction])
+    assert (
+        (results[0]["pension_tax_allowance"] > 0)
+        & (results[0]["property_finance_cost_relief"] > 0)
+    ).any()