In the period leading up to the coronavirus (COVID-19) pandemic, the richest (£107,800) one-fifth of people's average household incomes before taxes and benefits was over 12 times larger than the poorest fifth (£8,500); however, this gap reduced to four times (£75,600 and £18,600 respectively) when taxes and benefits were taken into account.
Despite the redistributive power of taxes and benefits, income inequality as measured by the Gini coefficient for household income after taxes and benefits income has increased over the last 10 years, rising by an average of 0.2 percentage points per year.
The rise in inequality of household income after taxes and benefits in the last decade is largely down to the diminishing effectiveness of cash benefits to redistribute income from the richest to the poorest, coinciding with the freezing of many cash benefits at their financial year ending (FYE) 2016 values.
Income inequality in the UK has steadily increased to 36.3%, according to estimates from the Household Finances Survey; this is the highest reported measure over the 10-year period leading up to financial year ending (FYE) 2020 (April 2019 to March 2020).
However, income inequality remains lower than levels reported during the economic downturn of FYE 2008 (38.6%).
Income inequality for people in retired households increased by 3.5 percentage points to 30.7% in the 10-year period leading up to FYE 2020; this compares with 2 percentage points growth over the same period to reach 36.5% for people living in non-retired households.
Average annual incomes, taxes and benefits, and household characteristics of retired and non-retired households in the UK. Data for financial years, by quintile and decile groups, country and region and tenure type.
Estimates from the Understanding Society: COVID-19 Study, 2020, UK Household Longitudinal Study (UKHLS) and Wealth and Assets Survey (WAS) to explore the social impacts of the coronavirus (COVID-19) pandemic on people from different ethnic groups in the UK.
Estimates from multiple sources for personal and economic well-being to understand the economic impact of the coronavirus (COVID-19) pandemic on households in Great Britain from March 2020 to April 2021.
This article describes the results of analysis of the financial capability measures contained in the 2010 to 2012 Wealth and Assets Survey, many of which were asked for the first time in this wave. It has been written by Andrea Finney and David Hayes of the University of Bristol’s Personal Finance Research Centre to follow the style of an Office for National Statistics statistical bulletin