Music, Storytelling, Statistics

Assumptions

There are a host of assumptions that go into the Tax calculations, which make it indicative rather than 'accurate'. Here's a huge list:

Gross Earnings

There is not an easy data source to use to get the percentiles of adults gross income. The incomes are derived from the percenitile list of gross pay of income tax payers, the ASHE percentiles of weekly gross pay (which includes pay below the income tax threshold), the unemployment rate, and the distribution of higher earner pay (note this only affects the highest tax payer and the estimate of budgetary impact). Using these sources and cubic spline interpolation, a full distribution is built.

The biggest gap in data is from the unemployed to the 10th percentile of pay. The interpolation here should be taken with a huge pinch of salt.

100 incomes are drawn from the distribution by taking the middle of each percent (so the 0.5th percentile, 1.5 etc.).

Tax benefits

There are plenty of funky little tax benefits which are not modelled here. Simplicity was the key here, old benefits that can no longer be entered into are not modelled, neither are benefits that vary by different needs (eg. disability benefit). The exception to this is universal credit (see below).

Universal Credit

Universal credit depends on where you live, who you live with and your assets. There are plenty of finicky exemptions that mean that plenty of people who could claim for a multitude of reasons don't. I have assumed that everyone with a gross income that could claim Universal Credit does, that they live in Lambeth (because I do), and that if they live with a partner that the combined benefit is split equally.

As a personal aside, the inconsistency of Universal Credit (being reduced) when you only live with a partner, vs. Marriage benefit requiring you to be married is ridiculous.

Pensions

All pensions are assumed to be The New State Pension. It is assumed that all people over 65 have had enough NI years to claim it.

Student Loans

The latest plan is modelled. In the graph the amount paid in is shown with the age only mattering if the age picked is greater than the current age limit. A cap is implemented when working out the amount paid when calculating the total taxes and benefits for higher tax payers based on them having had that salary for 5 years.

Currently only Income Tax

More updates are needed to include other taxes including Council tax and the BBC license fee.

Total tax and benefits

This is calculated using the original distribution points rather than the 100 individuals. This is because the extreme high end of the distribution is important to the tax paid.

Demographic information for the UK is taken to determine the amount of individuals claiming state pension, marriage benefit, and for the different universal credit boundaries (because whether you are under or over 25 for some reason matters...). No attempt has been made to assume that younger people are more likely to have lower salaries. This will over-estimate universal credit but underestimate student loan payments.

Cubic spline interpolation is used to determine the total tax paid