Capital gains tax and pensions tax: port HMRC subtrees with behavioural elasticities

[vahid-ahmadi]

Gap

Python:

• policyengine_uk/variables/gov/hmrc/capital_gains_tax/ — CGT bands, residential vs non-residential rates, annual exempt amount, behavioural elasticity to rate changes (realisation response)
• policyengine_uk/variables/gov/hmrc/pensions/ — annual allowance, tapered annual allowance, lifetime allowance (legacy), pension input amounts, salary-sacrifice-adjusted pensionable earnings, relief-at-source vs net-pay

Rust src/variables/wealth_taxes.rs has 4 functions and no CGT or pensions-tax logic.

Why it matters

• Salary-sacrifice cap reform (existing notebooks: salary_sacrifice_cap_*.ipynb, including a published comparison vs OBR) — requires the pension-relief stack to model what 'capping at £2k/£10k' actually means for taxable income and NICs
• CGT rate increases were a major Oct-2024 budget topic — the user's tax_reform_* and reeves_budget_2025_* notebooks need this; without behavioural elasticities, scores will be too high
• Pensions tax changes (annual-allowance taper, removal of LSA) cannot be modelled

What to port

1. CGT taxable gains, AEA, residential surcharge, basic-rate / higher-rate splits
2. CGT behavioural elasticity (realisation response to rate changes — Python uses a configurable elasticity parameter)
3. Pension input amount, employer + employee contributions, salary-sacrifice treatment
4. Annual allowance + tapered annual allowance + carry-forward (or document any simplifications)
5. Pension tax relief (relief at source vs net pay) and how it lands in income tax

Effort

Medium. The CGT calculation itself is small; behavioural-response infrastructure overlaps with the dynamics issue. Pensions are more complex due to the relief-mode interactions.

References

• Python: policyengine_uk/variables/gov/hmrc/capital_gains_tax/, policyengine_uk/variables/gov/hmrc/pensions/
• Python params: policyengine_uk/parameters/gov/hmrc/capital_gains_tax/, parameters/gov/hmrc/pensions/
• Rust: src/variables/wealth_taxes.rs