Income inequality in the UK

In 2021/22, 37% of total disposable household income in the UK went to the fifth of individuals with the highest household incomes, while 8% went to the fifth with the lowest.

The Gini coefficient for income inequality summarises income inequality into a single number between 0 and 100%, where a higher percentage means more unequal. The Gini coefficient was 34% before housing costs and 38% after housing costs in 2021/22.

A couple without children with disposable income below £270 per week before housing costs were lowest-income 10% of households in 2021/22. To be in the highest-income 10% required an income just over three and a half times higher, of at least £1,000

Trends in income inequality

Inequality in household incomes in the UK has remained at a roughly similar level since the early 1990s but is higher than during the 1960s and 1970s. While the share of income going to the top 1% of individuals by household income increased during the 1990s and 2000s, there was some reduction in inequality among the rest of the population (based on incomes before housing costs) with the result that inequality overall was fairly stable during this period.

The rising cost of living

The Office for Budget Responsibility forecasted in March 2023 that real household disposable income per person, a measure of living standards, will fall by a cumulative 5.7% over 2022/23 and 2023/24. This would be the largest two-year fall since records began in 1956/57.

The budgets of low-income households are most affected by the rising cost of living. ONS data shows that households with the lowest incomes experienced a higher than average inflation rate in October 2022, while the richest households experienced lower than average inflation.

The Resolution Foundation expects income inequality to fall during 2022/23 and 2023/24. This is due to benefits being uprated by 10.1% in April 2023 and targeted Government support for low-income households in the form of cost of living payments.

However, people at the top of the income distribution will see their incomes from investment and savings increase because of rising interest rates. This means that the Resolution Foundation predict the Gini coefficient to reach a record high of 40.8% in 2027/28.

Impact of coronavirus

During the coronavirus lockdowns, the wages of low-income households were disproportionately affected by the economic fallout. However, the benefits system means that the incomes of low-income households were not more affected than other households.

High- and middle-income households saved more than low-income households during coronavirus lockdowns, and low-income households were more likely to go into debt.

Income inequality between regions, ethnic groups, and disability status

Historically, household income across the UK has varied significantly between regions and countries, ethnic groups, and the disability status of households.

The West Midlands (£507) had the lowest median income before housing costs in 2019/20 to 2021/22, while London (£662) had the highest. Households from a Bangladeshi ethnic group (£371) had the lowest median incomes before housing costs while households from a Chinese ethnic group (£637) had the highest. Families with a disabled member had a median income of £485 before housing costs during this period, compared to £604 for households where nobody was disabled.

International comparisons

OECD figures suggest that the UK has among the highest levels of income inequality in the European Union (as measured by the Gini coefficient), although income inequality is slightly lower than in the United States.