Correct the capital gains rate effective date and annualise the split year

changelog.d/cgt-rate-effective-dates.md

@@ -0,0 +1,3 @@
+- Corrected the effective date of the capital gains tax rate rise to 30 October 2024, as Finance Act 2025 s.7 provides, from 6 April 2025.
+- Added opt-in day-weighted annualisation for parameters that change part-way through a fiscal year, and applied it to the capital gains rates, so 2024-25 reflects both rate schedules rather than only the one in force at the start of the year.
+- Annual Scenario parameter changes now cover the UK fiscal year they name, so an override applies at full strength instead of blending with prior law over its final five months.

policyengine_uk/parameters/gov/hmrc/cgt/additional_rate.yaml

@@ -1,16 +1,17 @@
-description: Capital gains tax rate on additional rate taxpayers. This parameter is under active development and reforms including it should not be cited.
+description: Capital gains tax rate on additional rate taxpayers. The rates changed part-way through 2024-25, so the value for that year is the day-weighted average of the rates in force before and after 30 October 2024.
 values:
   2015-01-01:
     value: 0.2
     reference:
       - title: Finance Act 2016 s. 83
         href: https://www.legislation.gov.uk/ukpga/2016/24/section/83
-  2025-04-06:
+  2024-10-30:
     value: 0.24
     reference:
       - title: Finance Act 2025 s. 7
         href: https://www.legislation.gov.uk/ukpga/2025/8/section/7
 metadata:
+  fiscal_year_blend: true
   unit: /1
   label: Capital Gains Tax additional rate
   reference:

policyengine_uk/parameters/gov/hmrc/cgt/basic_rate.yaml

@@ -1,16 +1,17 @@
-description: Capital gains tax rate on basic rate taxpayers. This parameter is under active development and reforms including it should not be cited.
+description: Capital gains tax rate on basic rate taxpayers. The rates changed part-way through 2024-25, so the value for that year is the day-weighted average of the rates in force before and after 30 October 2024.
 values:
   2015-01-01:
     value: 0.1
     reference:
       - title: Finance Act 2016 s. 83
         href: https://www.legislation.gov.uk/ukpga/2016/24/section/83
-  2025-04-06:
+  2024-10-30:
     value: 0.18
     reference:
       - title: Finance Act 2025 s. 7
         href: https://www.legislation.gov.uk/ukpga/2025/8/section/7
 metadata:
+  fiscal_year_blend: true
   unit: /1
   label: Capital Gains Tax basic rate
   reference:

policyengine_uk/parameters/gov/hmrc/cgt/higher_rate.yaml

@@ -1,16 +1,17 @@
-description: Capital gains tax rate on higher rate taxpayers. This parameter is under active development and reforms including it should not be cited.
+description: Capital gains tax rate on higher rate taxpayers. The rates changed part-way through 2024-25, so the value for that year is the day-weighted average of the rates in force before and after 30 October 2024.
 values:
   2015-01-01:
     value: 0.2
     reference:
       - title: Finance Act 2016 s. 83
         href: https://www.legislation.gov.uk/ukpga/2016/24/section/83
-  2025-04-06:
+  2024-10-30:
     value: 0.24
     reference:
       - title: Finance Act 2025 s. 7
         href: https://www.legislation.gov.uk/ukpga/2025/8/section/7
 metadata:
+  fiscal_year_blend: true
   unit: /1
   label: Capital Gains Tax higher rate
   reference:

policyengine_uk/simulation.py

@@ -16,6 +16,8 @@
 from policyengine_core.tools.hugging_face import download_huggingface_dataset
 from policyengine_core.tracers import FullTracer, SimpleTracer
 
+from policyengine_uk.utils.parameters import uk_fiscal_year_period
+
 # PolicyEngine UK imports
 from policyengine_uk.data.dataset_schema import (
     UKMultiYearDataset,
@@ -236,10 +238,12 @@ def apply_parameter_changes(self, changes: dict):
                 canonical_parameter
             )
             if isinstance(changes[parameter], dict):
-                # Time-period specific changes
+                # Time-period specific changes. A bare year names the UK
+                # fiscal year, so the override covers 6 April to 5 April and
+                # survives fiscal-year conversion at full strength.
                 for time_period in changes[parameter]:
                     p.update(
-                        period=time_period,
+                        period=uk_fiscal_year_period(time_period),
                         value=changes[parameter][time_period],
                     )
             else:

policyengine_uk/tests/policy/baseline/gov/hmrc/capital_gains_tax/capital_gains_tax.yaml

@@ -1,77 +1,85 @@
+# Rate mechanics are tested in 2025-26, where one set of rates applies to the
+# whole year. The rates rose part-way through 2024-25, so that year carries a
+# day-weighted average of the rates before and after 30 October 2024, tested
+# separately at the end of this file.
+
 - name: No capital gains
-  period: 2024
+  period: 2025
   input:
     adjusted_net_income: 0
     capital_gains: 0
   output:
     capital_gains_tax: 0
 
 - name: Capital gains below annual exempt amount
-  period: 2024
+  period: 2025
   input:
     adjusted_net_income: 0
     capital_gains: 2_000
   output:
     capital_gains_tax: 0
 
 - name: Capital gains just above annual exempt amount
-  period: 2024
+  period: 2025
   input:
     adjusted_net_income: 0
     capital_gains: 3_500
   output:
-    capital_gains_tax: 50
+    capital_gains_tax: 90
 
 - name: Basic rate capital gains tax
-  period: 2024
+  period: 2025
   input:
     adjusted_net_income: 20_000
     capital_gains: 23_000
   output:
-    capital_gains_tax: 2_000
+    capital_gains_tax: 3_600
 
 - name: Higher rate capital gains tax
-  period: 2024
+  period: 2025
+  absolute_error_margin: 0.01
   input:
     adjusted_net_income: 50_000
     capital_gains: 50_000
   output:
-    capital_gains_tax: 9_373
+    capital_gains_tax: 11_263.80
 
 - name: Additional rate capital gains tax
-  period: 2024
+  period: 2025
   input:
     adjusted_net_income: 150_000
     capital_gains: 100_000
   output:
-    capital_gains_tax: 19_400
+    capital_gains_tax: 23_280
 
 - name: Mixed rates capital gains tax
-  period: 2024
+  period: 2025
+  absolute_error_margin: 0.01
   input:
     adjusted_net_income: 35_000
     capital_gains: 40_000
   output:
-    capital_gains_tax: 5_873
+    capital_gains_tax: 7_963.80
 
 - name: High capital gains, low income
-  period: 2024
+  period: 2025
   input:
     adjusted_net_income: 10_000
     capital_gains: 200_000
   output:
-    capital_gains_tax: 35_630
+    capital_gains_tax: 45_018
 
 - name: Very high capital gains and income
-  period: 2024
+  period: 2025
+  absolute_error_margin: 0.1
   input:
     adjusted_net_income: 500_000
     capital_gains: 1_000_000
   output:
-    capital_gains_tax: 199_400
+    capital_gains_tax: 239_280
 
 - name: Edge case, capital gains exactly equal to annual exempt amount
-  period: 2024
+  period: 2025
   input:
     adjusted_net_income: 0
     capital_gains: 3_000
@@ -132,3 +140,26 @@
     capital_gains: 32_942.86
   output:
     capital_gains_tax: 5_389.71
+
+# Finance Act 2025 s.7 raised the main rates for disposals from 30 October
+# 2024, part-way through 2024-25. An annual model cannot place a disposal
+# before or after that date, so the year takes the day-weighted average of the
+# two schedules: 207 days at 10% and 20%, then 158 days at 18% and 24%.
+
+- name: Case 16, the split 2024-25 year taxes basic rate gains at the blended rate.
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    adjusted_net_income: 20_000
+    capital_gains: 23_000
+  output:
+    capital_gains_tax: 2_692.60
+
+- name: Case 17, the split 2024-25 year taxes higher rate gains at the blended rate.
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    adjusted_net_income: 150_000
+    capital_gains: 100_000
+  output:
+    capital_gains_tax: 21_079.56

policyengine_uk/tests/test_fiscal_year_parameters.py

@@ -102,6 +102,121 @@ def test_december_2025_returns_fiscal_year_2025_value(self, uk_system):
         assert child_limit == 2
 
 
+class TestMidYearRateChanges:
+    """Tests for changes taking effect part-way through a fiscal year.
+
+    Sampling one date per year drops any change taking effect after it.
+    Parameters carrying `fiscal_year_blend: true` are day-weighted across
+    the year instead.
+    """
+
+    # Fiscal year 2024-25 runs 6 April 2024 to 5 April 2025: 207 days at the
+    # rates in force before 30 October 2024, then 158 days at the rates after.
+    DAYS_BEFORE = 207
+    DAYS_AFTER = 158
+    TOTAL_DAYS = DAYS_BEFORE + DAYS_AFTER
+
+    def blended(self, before, after):
+        return (before * self.DAYS_BEFORE + after * self.DAYS_AFTER) / self.TOTAL_DAYS
+
+    @pytest.mark.parametrize(
+        "rate_name, before, after",
+        [("basic_rate", 0.10, 0.18), ("higher_rate", 0.20, 0.24)],
+    )
+    def test_cgt_rates_blend_across_the_split_year(self, rate_name, before, after):
+        """2024-25 carries both statutory rates, so the year takes their average."""
+        system = CountryTaxBenefitSystem()
+        rates = {
+            year: getattr(
+                system.get_parameters_at_instant(str(year)).gov.hmrc.cgt, rate_name
+            )
+            for year in (2023, 2024, 2025)
+        }
+
+        assert rates[2023] == pytest.approx(before)
+        assert rates[2024] == pytest.approx(self.blended(before, after))
+        assert rates[2025] == pytest.approx(after)
+
+    def test_cgt_rate_rise_takes_effect_from_the_statutory_date(self):
+        """Finance Act 2025 s.7 applies to disposals from 30 October 2024.
+
+        Read before fiscal year conversion, which is what the statutory dates
+        feed. Regression test for dating the rise to 6 April 2025, which moved
+        a change the legislation makes in 2024-25 into the following year.
+        """
+        import policyengine_uk
+        from pathlib import Path
+        from policyengine_core.parameters import ParameterNode
+
+        parameters = ParameterNode(
+            directory_path=str(Path(policyengine_uk.__file__).parent / "parameters")
+        )
+        higher_rate = parameters.gov.hmrc.cgt.higher_rate
+
+        assert higher_rate("2024-10-29") == pytest.approx(0.20)
+        assert higher_rate("2024-10-30") == pytest.approx(0.24)
+
+    def test_blending_is_opt_in(self, uk_system):
+        """Parameters without the flag keep one sampled value for the year.
+
+        National Insurance rates fell part-way through 2022-23, and the year
+        still takes the rate in force at its start rather than an average.
+        Whether to blend is a decision per parameter: a transaction is taxed
+        at the rate in force on its date, not at a yearly average.
+        """
+        parameters = uk_system.get_parameters_at_instant("2022")
+        employee_rates = parameters.gov.hmrc.national_insurance.class_1.rates.employee
+
+        assert employee_rates.main == pytest.approx(0.1325)
+
+
+class TestScenarioOverrides:
+    """Annual Scenario overrides name UK fiscal years.
+
+    Written as calendar years, an override's final five months fell back to
+    prior law and fiscal-year conversion blended the two: an override of 0.5
+    on a blended CGT rate resolved to 0.42. The override now covers 6 April
+    to 5 April.
+    """
+
+    def _reformed(self):
+        from policyengine_uk import Microsimulation
+        from policyengine_uk.model_api import Scenario
+
+        return Microsimulation(
+            situation={
+                "people": {
+                    "person": {
+                        "age": {2025: 45},
+                        "adjusted_net_income": {2025: 20_000},
+                        "capital_gains": {2025: 23_000},
+                    }
+                },
+                "benunits": {"benunit": {"members": ["person"]}},
+                "households": {"household": {"members": ["person"]}},
+            },
+            scenario=Scenario(
+                parameter_changes={"gov.hmrc.cgt.basic_rate": {"2025": 0.5}}
+            ),
+        )
+
+    def test_override_applies_at_full_strength(self):
+        sim = self._reformed()
+        rate = sim.tax_benefit_system.parameters.gov.hmrc.cgt.basic_rate
+
+        assert rate("2025") == pytest.approx(0.5)
+        cgt = sim.calculate("capital_gains_tax", 2025).values[0]
+        assert cgt == pytest.approx(10_000.0)
+
+    def test_override_leaves_other_years_on_law(self):
+        """The split 2024-25 blend and the 2026 reversion both survive."""
+        sim = self._reformed()
+        rate = sim.tax_benefit_system.parameters.gov.hmrc.cgt.basic_rate
+
+        assert rate("2024") == pytest.approx((0.10 * 207 + 0.18 * 158) / 365)
+        assert rate("2026") == pytest.approx(0.18)
+
+
 class TestFiscalYearCoverage:
     """Tests to verify fiscal year conversion covers all needed years."""