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PolicyEngine-UK

This book contains an introduction to using PolicyEngine-UK to model UK taxes and benefits. It is currently a work in progress and may be added to. PolicyEngine-UK is a microsimulation model of the UK tax and benefit system: it is a model which calculates variable values over UK entities from given policy parameters and structures. In practice, this gives it two main uses: calculating statistics under current tax and benefit law, and simulating effects of potential new changes to the legislation.

We’re grateful to the UKMOD team for publishing descriptions of their model; our ability to reference these descriptions accelerated OpenFisca UK’s development. UKMOD is maintained, developed and managed by the Centre for Microsimulation and Policy Analysis at the Institute for Social and Economic Research (ISER), University of Essex.

Code examples and outputs are re-run automatically on each new version of PolicyEngine-UK.

Short demo

Baseline estimates

Calculating, for example, the total Income Tax liability by region can be done with the following code:

from policyengine_uk import Microsimulation
import pandas as pd

ENHANCED_FRS = "hf://policyengine/policyengine-uk-data/enhanced_frs_2022_23.h5"

sim = Microsimulation(dataset=ENHANCED_FRS)

df = sim.calculate_dataframe(
    [
        "household_id",  # If the first variable is household level, the dataframe will project everything to households. Same for people.
        "income_tax",
        "region",
    ],
    period=2025,
)

df.groupby("region").income_tax.sum().sort_values(
    ascending=False
) / 1e9  # Weights automatically applied
region LONDON 78.710210 SOUTH_EAST 75.588976 EAST_OF_ENGLAND 30.134433 WEST_MIDLANDS 23.276691 SCOTLAND 23.037309 NORTH_WEST 20.306150 SOUTH_WEST 17.589321 YORKSHIRE 15.903155 EAST_MIDLANDS 14.536368 WALES 10.113785 NORTH_EAST 7.983999 NORTHERN_IRELAND 5.428561 dtype: float64

Reform evaluation

Below is an example of simulating the effects of a reform (namely, increasing the basic rate of income tax from 20% to 23%).

Source
from policyengine_uk.model_api import *


def change_tax_parameters(parameters):
    parameters.gov.hmrc.income_tax.rates.uk.brackets[0].rate.update(
        period=periods.period("year:2019:10"), value=0.23
    )
    return parameters


class reform(Reform):
    def apply(self):
        self.modify_parameters(change_tax_parameters)


baseline = Microsimulation(dataset=ENHANCED_FRS)
reformed = Microsimulation(dataset=ENHANCED_FRS, reform=reform)
revenue = (
    reformed.calculate("gov_balance", 2025).sum()
    - baseline.calc("gov_balance", 2025).sum()
)
f"Revenue: £{round(revenue / 1e9, 1)}bn"
'Revenue: £21.3bn'
Usage
Getting started