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.
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.
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