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 estimation#

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%).

Hide code cell 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 / 1e+9, 1)}bn"

'Revenue: £21.3bn'