This appendix provides the detail behind the household-level effects analysis in the report's main Effects section. It documents the archetype selection methodology, gives the full archetype gallery (twelve cases rather than the six in the main text), reproduces the population-level distribution tables in cross-tab form, and shows how the figures respond to changes in the Base and Top rate parameters.
It is a companion to two other appendices: the NC Tax Model appendix documents the percentile-level revenue model and the income-side calculations; the NC on Benefits appendix documents the household-level revenue calculation and population-level distributional results. The present appendix builds on the same microdata file used by that appendix and applies a different lens: the impact at individual household level rather than aggregate revenue.
Methodology for archetype selection
The archetypes in the main Effects section are not constructed cases. Each is a real surveyed household drawn from the FRS 2022-23 microdata used throughout this analysis, selected by the following procedure.
- Define the segment. For each archetype, a filter is applied to the microdata defining the household type, income quintile, family composition, and presence of disability benefits.
- Identify representative values. Within the filtered subset, weighted medians and weighted means are computed for the key variables (total benefit income, taxable benefit income, disability income, non-benefit NC income, primary adult's NC percentile).
- Select a single household closest to the segment centroid. Each household in the filtered subset is scored by its distance from the segment's median values across these variables (sum of squared standardised distances). Among the lowest 5 per cent by distance score, the household with the highest survey weight is chosen — this is the household whose record most strongly represents the segment in the gross-up to UK level.
- Report the selected household's actual values. The figures in the archetype tables are the household's actual record values, not constructed approximations. NC on benefits is recomputed at the report's rate schedule from the household's
excess_over_allowanceand its primary adult's NC percentile.
The benefit of using real households is that the relationships between variables (a lone parent's income composition, a pensioner's mix of state pension and Pension Credit, a multi-adult household's earnings-to-benefits ratio) are internally consistent and reflect actual UK household structures rather than averaged abstractions.
Full archetype gallery (twelve cases)
The six archetypes in the main Effects section are the most resonant cases. The full set below adds six further cases that fill out the household type × quintile space. All figures are at the steady-state NC rate schedule used in the main report.
Archetype A1 — Single working-age adult on UC, Q1
| Component | Value |
|---|---|
| Adults / dependent children | 1 / 0 |
| Total benefit income | £12,481 |
| Of which taxable | £12,481 |
| Of which disability (exempt) | £0 |
| Non-benefit NC income | £0 |
| Allowance (0 × £12,570) | £0 |
| Excess over allowance | £12,481 |
| Primary adult NC percentile | 10 |
| NC marginal rate | 4.4% |
| NC on benefits (steady state) | £549 |
| Year 3 (33% phase-in) | £181 |
UK households fitting this profile: approximately 0.40 million.
Archetype A2 — Single working-age adult on UC with disability, Q1
| Component | Value |
|---|---|
| Adults / dependent children | 1 / 0 |
| Total benefit income | £25,998 |
| Of which taxable | £18,440 |
| Of which disability (exempt) | £7,557 |
| Non-benefit NC income | £0 |
| Allowance | £0 |
| Excess over allowance | £18,440 |
| Primary adult NC percentile | 9 |
| NC marginal rate | 4.0% |
| NC on benefits (steady state) | £730 |
| Year 3 (33% phase-in) | £241 |
UK households fitting this profile: approximately 0.56 million.
Archetype A3 — Lone parent with two children on UC, Q1
| Component | Value |
|---|---|
| Adults / dependent children | 1 / 2 |
| Total benefit income | £25,196 |
| Of which taxable | £25,196 |
| Of which disability (exempt) | £0 |
| Non-benefit NC income | £0 |
| Allowance (2 × £12,570) | £25,140 |
| Excess over allowance | £56 |
| Primary adult NC percentile | 10 |
| NC marginal rate | 4.4% |
| NC on benefits (steady state) | £2 |
| Year 3 (33% phase-in) | £1 |
UK households fitting this profile: approximately 0.11 million. The per-child allowance fully shelters this household's benefit income; the £2 figure is effectively zero and would round out under any operational rounding rule.
Archetype A4 — Lone parent with one child, Q1-Q2
| Component | Value |
|---|---|
| Adults / dependent children | 1 / 1 |
| Total benefit income | £20,122 |
| Of which taxable | £20,122 |
| Of which disability (exempt) | £0 |
| Non-benefit NC income | £443 |
| Allowance (1 × £12,570) | £12,570 |
| Excess over allowance | £7,552 |
| Primary adult NC percentile | 14 |
| NC marginal rate | 6.2% |
| NC on benefits (steady state) | £465 |
| Year 3 (33% phase-in) | £153 |
UK households fitting this profile: approximately 0.18 million. With only one child, the allowance is half the size of the two-child case; benefit income above £12,570 attracts NC at the low Q1 marginal rate.
Archetype A5 — Couple with two children, mixed earnings, Q2
| Component | Value |
|---|---|
| Adults / dependent children | 2 / 2 |
| Total benefit income | £36,126 |
| Of which taxable | £25,992 |
| Of which disability (exempt) | £10,134 |
| Non-benefit NC income | £18,907 |
| Allowance (2 × £12,570) | £25,140 |
| Excess over allowance | £852 |
| Primary adult NC percentile | 32 |
| NC marginal rate | 14.1% |
| NC on benefits (steady state) | £120 |
| Year 3 (33% phase-in) | £40 |
UK households fitting this profile: approximately 0.15 million.
Archetype A6 — Couple with two children, middle earnings, Q3
| Component | Value |
|---|---|
| Adults / dependent children | 2 / 2 |
| Total benefit income | £4,580 (Child Benefit only) |
| Of which taxable | £4,580 |
| Of which disability (exempt) | £0 |
| Non-benefit NC income | £44,777 |
| Allowance (2 × £12,570) | £25,140 |
| Excess over allowance | £0 |
| Primary adult NC percentile | 58 |
| NC marginal rate | 26.8% |
| NC on benefits (steady state) | £0 |
| Year 3 (33% phase-in) | £0 |
UK households fitting this profile: approximately 0.28 million. Middle-earning couples with children typically receive only Child Benefit; this is below the two-child allowance and attracts no NC at all. The household does pay NC on its £44,777 of earnings (covered on the income side).
Archetype A7 — Couple with two children, upper-middle earnings, Q4
| Component | Value |
|---|---|
| Adults / dependent children | 2 / 2 |
| Total benefit income | £2,300 (Child Benefit) |
| Of which taxable | £2,300 |
| Of which disability (exempt) | £0 |
| Non-benefit NC income | £62,400 |
| Allowance (2 × £12,570) | £25,140 |
| Excess over allowance | £0 |
| Primary adult NC percentile | 75 |
| NC marginal rate | 37.5% |
| NC on benefits (steady state) | £0 |
| Year 3 (33% phase-in) | £0 |
UK households fitting this profile: approximately 0.21 million. As above: Child Benefit alone sits well below the allowance, so no NC on benefits applies.
Archetype A8 — Single pensioner with Pension Credit, Q2
| Component | Value |
|---|---|
| Adults / dependent children | 1 / 0 |
| Total benefit income | £4,408 |
| Of which taxable | £4,408 |
| Of which disability (exempt) | £0 |
| Non-benefit NC income (state pension + private) | £15,693 |
| Allowance | £0 |
| Excess over allowance | £4,408 |
| Primary adult NC percentile | 30 |
| NC marginal rate | 13.2% |
| NC on benefits (steady state) | £582 |
| Year 3 (33% phase-in) | £192 |
UK households fitting this profile: approximately 1.83 million. This is the largest single archetype in the analysis. Most single pensioners receiving Pension Credit and housing-related support fall in this band.
Archetype A9 — Couple pensioners, modest savings income, Q3
| Component | Value |
|---|---|
| Adults / dependent children | 2 / 0 |
| Total benefit income | £1,374 |
| Of which taxable | £1,374 |
| Of which disability (exempt) | £0 |
| Non-benefit NC income (state pensions + private + savings) | £41,041 |
| Allowance | £0 |
| Excess over allowance | £1,374 |
| Primary adult NC percentile | 49 |
| NC marginal rate | 21.6% |
| NC on benefits (steady state) | £296 |
| Year 3 (33% phase-in) | £98 |
UK households fitting this profile: approximately 0.93 million.
Archetype A10 — Working-age couple, no children, both earning, Q3
| Component | Value |
|---|---|
| Adults / dependent children | 2 / 0 |
| Total benefit income | £800 |
| Of which taxable | £800 |
| Of which disability (exempt) | £0 |
| Non-benefit NC income | £52,000 |
| Allowance | £0 |
| Excess over allowance | £800 |
| Primary adult NC percentile | 55 |
| NC marginal rate | 25.0% |
| NC on benefits (steady state) | £200 |
| Year 3 (33% phase-in) | £66 |
UK households fitting this profile: approximately 1.2 million. Working-age couples without children typically receive small amounts of taxable benefit income from various sources (Statutory Maternity Pay, contributory ESA, etc.). With no per-child allowance, the small amounts that do flow are subject to NC at the household's mid-range marginal rate.
Archetype A11 — Multi-adult household with children, Q3-Q4
| Component | Value |
|---|---|
| Adults / dependent children | 4 / 2 |
| Total benefit income | £31,332 |
| Of which taxable | £31,332 |
| Of which disability (exempt) | £0 |
| Non-benefit NC income | £89,555 |
| Allowance (2 × £12,570) | £25,140 |
| Excess over allowance | £6,192 |
| Primary adult NC percentile | 56 |
| NC marginal rate | 25.6% |
| NC on benefits (steady state) | £1,585 |
| Year 3 (33% phase-in) | £523 |
UK households fitting this profile: approximately 0.4 million. Multi-adult households are the most exposed of the family types because the per-child allowance scales with children, not adults, and they have more adults attracting benefit receipts.
Archetype A12 — Multi-adult household without children, Q3
| Component | Value |
|---|---|
| Adults / dependent children | 3 / 0 |
| Total benefit income | £30,289 |
| Of which taxable | £22,102 |
| Of which disability (exempt) | £8,187 |
| Non-benefit NC income | £32,998 |
| Allowance | £0 |
| Excess over allowance | £22,102 |
| Primary adult NC percentile | 59 |
| NC marginal rate | 27.4% |
| NC on benefits (steady state) | £6,056 |
| Year 3 (33% phase-in) | £1,998 |
UK households fitting this profile: approximately 0.17 million. Multi-adult households without children that receive substantial benefit income (typically a mix of disability and other taxable benefits across the adults) are the most exposed segment in the analysis. The per-child allowance is zero; the full taxable benefit income is subject to NC at a mid-distribution marginal rate.
Population-level distribution in cross-tab form
The following table reproduces the Quintile × Household Type intersection from the NC on Benefits appendix, with all values £bn at the steady-state NC rate schedule used in the main report.
| Quintile | Pensioners | WA No Children | Lone Parents | Couple w/children | Multi-adult | Total |
|---|---|---|---|---|---|---|
| Q1 | £0.10 | £1.61 | £0.20 | £0.19 | £0.22 | £2.32 |
| Q2 | £2.22 | £0.74 | £0.14 | £0.12 | £0.36 | £3.58 |
| Q3 | £1.17 | £0.88 | £0.07 | £0.22 | £1.24 | £3.58 |
| Q4 | £0.80 | £0.98 | £0.03 | £0.19 | £0.95 | £2.95 |
| Q5 | £0.79 | £1.07 | £0.00 | £0.28 | £1.15 | £3.29 |
| Total | £5.09 | £5.28 | £0.45 | £0.99 | £3.92 | £15.72 |
The same data viewed by share of total NC on benefits:
| Quintile | Pensioners | WA No Children | Lone Parents | Couple w/children | Multi-adult | Total |
|---|---|---|---|---|---|---|
| Q1 | 1% | 10% | 1% | 1% | 1% | 15% |
| Q2 | 14% | 5% | 1% | 1% | 2% | 23% |
| Q3 | 7% | 6% | 0% | 1% | 8% | 23% |
| Q4 | 5% | 6% | 0% | 1% | 6% | 19% |
| Q5 | 5% | 7% | 0% | 2% | 7% | 21% |
| Total | 32% | 34% | 3% | 6% | 25% | 100% |
Three observations follow from this distribution.
Lone parents pay almost nothing. Across all quintiles, lone parents contribute £0.45 billion (2.4 per cent of total NC on benefits) despite their substantial taxable benefit base. The per-child allowance is doing exactly the work the design intends.
Couples with children pay little. £1 billion (6.5 per cent of total) across 5.4 million households. The same protection mechanism applies.
Pensioners (no per-child allowance, near-universal supplementary benefit receipt) and working-age childless adults (no per-child allowance, UC and ESA recipients) are the two single largest segments, each contributing approximately one-third of NC on benefits.
A common reader question: why does NC on benefits load so heavily on pensioners and working-age childless adults?
The answer is structural. These two segments receive supplementary benefits but cannot draw on a per-child allowance to shelter them. They are the segments where benefit income substitutes for, or supplements, the cost of meeting an adult-headed household's needs rather than meeting the additional cost of children. The programme design uses Universal Service to reduce the cost of living with the redirected expenditure from benefits..
Sensitivity to rate choice
The figures in the archetype tables and the cross-tab above are computed at a specific Base and Top rate configuration. As rates change, the NC marginal rate at each percentile changes, and the household's NC on benefits scales accordingly.
The methodology is rate-parametric: the allowance structure, taxable base, disability exemption, primary-adult percentile assignment and household composition treatment are all independent of the rate schedule. Only the marginal rate applied to the excess-over-allowance changes when rates change.
The following sensitivity uses Archetype A8 (single pensioner with Pension Credit, Q2) as an illustration. At an excess over allowance of £4,408 and a primary adult percentile of 30, the marginal rate scales linearly with the Base rate (since percentile 30 is below P50). The Top rate does not affect this household because the percentile is below 90.
| Base / Top rates | Marginal rate at P30 | NC on benefits |
|---|---|---|
| 18% / 42% | 10.8% | £476 |
| 20% / 44% | 12.0% | £529 |
| 22% / 46% | 13.2% | £582 |
| 24% / 48% | 14.4% | £635 |
| 26% / 50% | 15.6% | £688 |
Above-P90 households would scale with the Top rate instead. Mid-distribution households (P50–P90) scale with a weighted combination of both rates depending on their percentile.
The aggregate NC on benefits figure scales approximately linearly with the rate schedule, weighted by where benefit-receiving households sit in the distribution. The blended effective rate on excess (NC on benefits divided by total excess over allowance) is in the region of 14 per cent at the rates used in the main report; this rises and falls with the Base rate roughly in proportion.
Phase-in dynamics
The phase-in for NC on benefits is compressed into a three-year schedule (Years 3 to 5 of NC operation) so that it completes within the five-year cashflow horizon of the report's fiscal modelling. The ramp adds approximately one-third of the steady-state rate per year, on the following schedule:
| Year of NC operation | Phase-in fraction | Effective NC on benefits rate |
|---|---|---|
| Year 1 | 0% | No NC on benefits collected (PAYE and Self Assessment running on income-side NC only) |
| Year 2 | 0% | No NC on benefits collected |
| Year 3 | 33% | One third of steady-state values shown in the archetype tables |
| Year 4 | 67% | Two thirds of steady-state values |
| Year 5 onwards | 100% | Steady-state (figures shown in archetype tables) |
Three things to note about this schedule.
The two-year lag (Years 1 and 2) is deliberate. This gives time for the cost of living reductions from the Universal Services to take effect. It allows PAYE income-side NC and Self Assessment income-side NC to bed in before DWP begins source deductions on benefit income. It also allows the National Savings Bond inheritance mechanism to start receiving its first cohort of deposits without simultaneously imposing benefit deductions. The income-side NC framework can carry the revenue weight during the lag period.
The phase-in is uniform across all benefit-receiving households. It does not vary by quintile, household type, or absolute amount of NC on benefits. Its operational purpose is to limit the cost of any early calculation errors made by DWP source deductions and to give recipients time to adjust to the change in post-deduction benefit value. Its policy purpose is to make explicit that the transition is managed rather than abrupt.
The implication for the archetypes is straightforward: each "NC on benefits (steady state)" figure should be treated as zero for Years 1 and 2, one third for Year 3, two thirds for Year 4, and full from Year 5 onwards.
Cross-references
The following appendices provide complementary material:
- NC Tax Model appendix — the underlying percentile-level model, FRS dataset construction, uprating methodology, FRS coverage scalars, and income-side NC calculations.
- NC on Benefits appendix — the household-level methodology, the per-child allowance principle, the disability exemption, source deduction by DWP, and the population-level revenue and distribution figures.
- NC Implementation appendix — the legislative, technical and administrative pathway for introducing NC, including the timeline for DWP source deductions and the rationale for the phase-in.
The Effects section in the main report draws on all three.
Microdata file
The household-level analysis in this appendix is computed from NC_on_Benefits_Households.csv, which contains one row per surveyed FRS 2022-23 household (16,754 records grossing to 28.78 million UK households). The file structure is documented in the NC on Benefits appendix. The archetype examples are real records from this file, identified by their household_id in the appendix backing notes.