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Add WTC and CTC documentation page (#771) (#1710)
Ticks off the WTC and CTC entries in #771's docs-pages todo list. Combined into one page because the two tax credits share the means-test machinery in gov.dwp.tax_credits and were jointly closed to new awards on 5 April 2025. The page covers: - the gov.dwp.tax_credits.active flag that short-circuits the entire computation from 2025-04-06, - the WTC and CTC element trees, with pointers to the per-element YAML files, - the hours test for WTC and the two-child limit + qualifying-child tests for CTC, - the shared income threshold / reduction-rate / min-benefit-floor means-test logic in tax_credits_reduction, - take-up via would_claim_WTC / would_claim_CTC, - the managed migration to Universal Credit and the reported-only state of the variables after April 2025, - references (Tax Credits Act 2002, SI 2002/2005, SI 2002/2007, HMRC end-of-scheme announcement, CBP-9984 migration briefing, HMRC tax credits statistics).
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‎changelog.d/771-tax-credits-docs.md‎

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- Add a documentation page covering Working Tax Credit and Child Tax Credit — both elements/hours/two-child-limit mechanics and the shared means test — with an explicit note that the scheme ended on 5 April 2025 and PolicyEngine gates the entire computation behind `gov.dwp.tax_credits.active`; ticks off the WTC and CTC entries in the #771 docs-pages todo list.

‎docs/book/programs/gov/dwp/tax-credits.md‎

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# Working Tax Credit and Child Tax Credit
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```{note}
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Working Tax Credit (WTC) and Child Tax Credit (CTC) are **legacy benefits**.
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They closed to new claims at various points from 2018 onwards and the
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scheme stopped paying ongoing awards on **5 April 2025**. PolicyEngine
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gates the entire tax credits computation behind
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`gov.dwp.tax_credits.active`, which flips to `false` from 2025-04-06. This
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page describes how WTC and CTC were modelled while the scheme was live.
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```
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WTC and CTC were jointly administered by HMRC (and historically DWP-routed
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on legacy migrations). PolicyEngine UK groups them under
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`gov.dwp.tax_credits` because the means-test logic is shared. The
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combined household award is the variable `tax_credits`, which sums the
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two with a minimum-payment floor:
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```python
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amount = wtc_pre_minimum + ctc_pre_minimum
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tax_credits = where(amount < min_benefit, 0, amount)
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```
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Parameters live in `policyengine_uk/parameters/gov/dwp/tax_credits/` and
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the formulas in `policyengine_uk/variables/gov/dwp/`.
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## Working Tax Credit (WTC)
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WTC was paid to working-age adults whose hours and income met the
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eligibility test. PolicyEngine computes it via `wtc_entitlement`, which
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is the **maximum WTC amount** minus the shared `tax_credits_reduction`
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from the means test, gated by the `would_claim_WTC` take-up input.
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### Elements (`gov.dwp.tax_credits.working_tax_credit.elements`)
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| Element | Parameter | Notes |
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|---------|-----------|-------|
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| Basic | `basic.yaml` | Flat amount everyone meeting the hours test gets |
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| Couple | `couple.yaml` | Couple addition |
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| Lone parent | `lone_parent.yaml` | Lone-parent addition |
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| 30-hour | `worker.yaml` | Awarded when total hours hit the higher band |
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| Disabled worker | `disabled.yaml` | |
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| Severely disabled worker | `severely_disabled.yaml` | |
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| Childcare cap | `childcare_1.yaml`, `childcare_2.yaml`, `childcare_coverage.yaml` | 70% of approved childcare costs up to the weekly cap (one or two-plus children) |
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### Hours test
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The `min_hours` tree (`min_hours/default.yaml`, `lower.yaml`,
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`old_age.yaml`, `couple_with_children.yaml`) encodes the bands that gate
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WTC eligibility — typically 30 hours/week for adults with no kids, 16 for
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lone parents, with a lower band for over-60s.
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## Child Tax Credit (CTC)
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CTC supported families with children regardless of whether anyone in the
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benunit worked. PolicyEngine computes it via `ctc_entitlement`, gated by
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`would_claim_CTC`.
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### Elements (`gov.dwp.tax_credits.child_tax_credit.elements`)
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| Element | Parameter |
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|---------|-----------|
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| Family | `family_element.yaml` (extinct from 2017 for new claims) |
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| Per qualifying child | `child_element.yaml` |
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| Disabled child addition | `dis_child_element.yaml` |
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| Severely disabled child addition | `severe_dis_child_element.yaml` |
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### Two-child limit
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Since April 2017 the child element has been restricted to the first two
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qualifying children. The `child_count` parameter under
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`child_tax_credit/limit/` and the `start_year/year.yaml` switch encode
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this. Children born before the start year and a few specific exceptions
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(non-consensual conception, multiple births, kinship care) are exempt;
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the exemptions are modelled via `gov/contrib/two_child_limit/` and
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related variables.
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### Qualifying child tests
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A child counts towards CTC if they are under 16, or under 20 and in
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approved education or training and meet the qualifying-young-person
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conditions. These tests are exposed as a family of `*_for_child_tax_credit`
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variables (`is_child_for_child_tax_credit`,
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`meets_qualifying_young_person_*_for_child_tax_credit`).
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## Shared means test
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WTC and CTC share a single income test in
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`gov.dwp.tax_credits.means_test`:
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```python
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threshold = ctc_only ? income_threshold_CTC_only : income_threshold
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overage = max(0, tax_credits_applicable_income - threshold)
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reduction = overage * income_reduction_rate
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```
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`tax_credits_applicable_income` is the benunit's total income net of
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specific disregards (pension contributions, certain benefits). The
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non-earned disregard for unearned income is the
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`means_test/non_earned_disregard.yaml` parameter. Awards below
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`min_benefit` (a £26-ish floor) are paid as zero.
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## Scheme end
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From `2025-04-06` onwards the `tax_credits` variable returns zero
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unconditionally — the `active` parameter flips off and the formula
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short-circuits with an empty array. The remaining caseload was migrated
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to Universal Credit via the DWP/HMRC managed-migration programme
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finalised on 5 April 2025.
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The reported variables (`working_tax_credit_reported`,
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`child_tax_credit_reported`) remain available for historical analysis,
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and the take-up flags (`would_claim_WTC`, `would_claim_CTC`) continue to
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be populated stochastically when the dataset is built so historical
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years still match published caseload aggregates.
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## References
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- [Tax Credits Act 2002](https://www.legislation.gov.uk/ukpga/2002/21/contents) — primary statute.
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- [The Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002 (SI 2002/2005)](https://www.legislation.gov.uk/uksi/2002/2005/contents).
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- [The Child Tax Credit Regulations 2002 (SI 2002/2007)](https://www.legislation.gov.uk/uksi/2002/2007/contents).
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- HMRC, [Tax credits have ended](https://www.gov.uk/tax-credits-have-ended) — official end-of-scheme announcement.
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- House of Commons Library, [Completing Universal Credit rollout (CBP-9984)](https://commonslibrary.parliament.uk/research-briefings/cbp-9984/) — managed-migration timeline.
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- HMRC, [Child and Working Tax Credit statistics](https://www.gov.uk/government/collections/personal-tax-credits-statistics) — caseload and expenditure outturns used for calibration.

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