UKMOD – A new tax-benefit model for the four nations of the UK
- Centre for Microsimulation and Policy Analysis, Institute for Social and Economic Research, United Kingdom
Tables
Types of Taxes in the UK tax-benefit system and modelling strategy in UKMOD
| Tax type | Tax name | Treatment in UKMOD |
|---|---|---|
| National Insurance Contributions (NICs) | Employees NICs | S |
| Self-employed NICs | S | |
| Employers NICs | S | |
| Credited (State) National Insurance Contributions | S (*) | |
| Private pension contributions | PS | |
| Direct Taxes | Income Tax | S |
| Council Tax | I | |
| Capital Gains Tax | E | |
| Inheritance Tax | E | |
| Property and Stamp Duties | E | |
| Indirect Taxes | Valued Added Tax (VAT) | E |
| Excises | E |
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Notes: UKMOD version A2.51+ .“E”: excluded from the model as it is neither included in the micro-data nor simulated; “I”: included in the micro-data but not simulated; “PS” partially simulated as some of its relevant rules are not simulated; “S” simulated although some minor or very specific rules may not be simulated.
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*
Simulated only in 2020 with simulation of Covid-19 shocks.
Types of Benefits in the UK tax-benefit system and modelling strategy in UKMOD
| Benefit type | Benefit name | Treatment in UKMOD |
|---|---|---|
| Contributory (aka National Insurance Benefits) | Bereavement benefit | I |
| Employment and Support Allowance (ESA) | I | |
| Incapacity Benefit | I | |
| Jobseeker’s Allowance (JSA): | PS (*) | |
| Maternity Allowance (MA) | I (†) | |
| State Pension | I | |
| Non-contributory, non-means-tested | Attendance Allowance (AA) | I |
| Carer’s Allowance (CA) | I | |
| Child Benefit (CB) | S | |
| Disability Living Allowance (DLA) | I | |
| Guardian’s Allowance | E | |
| Industrial Injuries Disablement Benefit | I | |
| Personal Independence Payment (PIP) | I | |
| Scottish Carer’s Allowance Supplement (Scotland only) | PS | |
| Scottish Child Winter Heating Assistance | S | |
| Severe Disablement Allowance (SDA) | I | |
| Sure Start Maternity Grant | S | |
| War Pension | PS | |
| Widow’s Pension | PS | |
| Winter Fuel Allowance | S | |
| Means-tested | Best Start Grant | S |
| Child Tax Credit (CTC) | S | |
| Council Tax Reduction (CTR) | S | |
| Employment and Support Allowance (income-based) | S | |
| Housing Benefit (HB) | S | |
| Income Support (IS) | S | |
| Jobseeker’s Allowance (income-based) | S | |
| Local Housing Allowance (LHA) | PS | |
| Pension Credit (PC) | S | |
| Scottish Child Payment | S | |
| Social Fund | E | |
| Universal Credit (UC) | S | |
| Working Tax Credit (WTC) | S | |
| Other (not strictly) benefits | Child support | I |
| Foster Allowances | E | |
| Occupational and approved personal pensions | I | |
| Statutory Maternity Pay (SMP) | I (†) | |
| Statutory Paternity Pay (SPP) | I (†) | |
| Statutory Sick Pay (SSP) | I | |
| Student loans | I | |
| Training allowances and Education Maintenance Allowance | I | |
| Covid-19 Market income support schemes | Coronavirus Job Retention Scheme (CJRS) | S |
| Self-Employed Income Support Scheme (SEISS) | S |
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Notes: UKMOD version A2.51+. “E”: excluded from the model as it is neither included in the micro-data nor simulated; “I”: included in the micro-data but not simulated; “PS” partially simulated as some of its relevant rules are not simulated; “S” simulated although some minor or very specific rules may not be simulated.
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Benefit cap is applied to the following policies: Income Support, Job Seeker’s Allowance, Employment Support Allowance, Housing Benefit, Bereavement Allowance, Carer’s Allowance, Child Benefit, Guardian’s Allowance, CTC, Incapacity Benefit, Maternity Allowance, Severe Disability Allowance, Widow’s Pension.
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*
A full simulation of unemployment benefits to replace the partial simulation of the contribution-based component of JSA can be switched on (see Reis and Tasseva, 2020 for details).
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†
A full simulation of Statutory Maternity Pay, Maternity Allowance and Statutory Paternity Pay is available starting from 2015 but not included in the baseline results. It can be switched on by users.
Nowcasting of the Covid-19 impact on labour market and income support
| Employees | Self-employed | |
|---|---|---|
| Employment shock | ||
| - extensive margin | Workers randomly put into unemployment based on OBR projections and aggregate ONS unemployment data | |
| - intensive margin | (Modelled jointly with income support) | Workers are randomly considered either unaffected (same number of hours worked) or affected (reduced number of hours worked), based on Understanding society Covid-19 study data |
| Income support | Workers randomly put to either full time or part-time furlough based on monthly HMRC aggregate data, partially disaggregated by sectors. | Workers randomly given a SEISS grant based on monthly HMRC aggregate data |
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Notes: ONS – Office for National Statistics, UK statistical agency; HMRC – HM Revenue & Customs, UK’s tax, payments and customs authority.
Short-term forecasting, up to the end of government support (October 2021)
| Employees | Self-employed | |
|---|---|---|
| Employment shock | ||
| - extensive margin | Workers randomly put into unemployment based on OBR yearly projections | |
| - intensive margin | (Modelled jointly with income support) | Proportion of workers affected linearly decreases to 0 |
| Income support | Proportion of workers on furlough linearly decreases to 0 | Proportion of workers receiving a SEISS grant linearly decreasing to 0 |
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Notes: OBR – Office for Budget Responsibility, a non-departmental public body funded by the UK Treasury, that provides independent economic forecasts and independent analysis of the public finances.
Medium-term forecasting, from the end of government support (October 2021) onwards
| Employees | Self-employed | |
|---|---|---|
| Employment shock | ||
| - extensive margin | Workers randomly put into unemployment based on OBR yearly projections | |
| - intensive margin | (Not modelled) | (Not modelled) |
| Income support | (Not available) | (Not available) |
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Notes: OBR – Office for Budget Responsibility, a non-departmental public body funded by the UK Treasury, that provides independent economic forecasts and independent analysis of the public finances.
Data and code availability
This paper does not make use of any data or code. The input data for UKMOD comes from the Family Resources Survey, which is available for research from the UK Data Service. The model is freely provided upon completion of a request form. See https://www.microsimulation.ac.uk/ukmod/access/ for conditions for access to both the model and the data.