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In 2019/20, 42% of all disposable household income in the UK went to the fifth with the highest household incomes, while 7% went to the lowest-income fifth (based on disposable income before housing costs have been deducted).

The Gini coefficient for income inequality was 35% before housing costs and 39% after housing costs in 2019/20.

A couple without children with disposable income below £264 per week before housing costs were in the 10% of people with the lowest household incomes in 2019/20. To be in the highest-income 10% required an income just over four times higher, of at least £1,070 per week.

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.

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.

The removal of the Universal Credit uplift in October 2021 will therefore increase income inequality. In July 2021, the Resolution Foundation estimated that the removal of the £20 uplift and the ending the equivalent boost to Working Tax Credit would mean households in the bottom fifth would lose 5.7% of their weekly incomes, an average of £800 in the following year.

Income inequality between regions, ethnic groups, and disability status

Household income varies significantly between regions and countries in the UK, ethnic groups, and the disability status of households. The North East (£480) had the lowest median income before housing costs in 2017/18-2019/20, while London (£615) had the highest. Households from a Pakistani ethnic group (£350) had the lowest median incomes before housing costs while households from an Indian ethnic group (£558) had the highest. Families with a disabled member had a median income of £467 before housing costs during this period, compared to £577 for households where nobody was disabled.

Measuring inequality

Measurement of income inequality is generally concerned with inequality in disposable incomes. The tax and benefit system acts to reduce inequality: disposable income is distributed more equally than income excluding benefits or before deducting taxes.

Household income statistics are adjusted for the number of people in the household because this affects how much income the household needs in order to experience a given standard of living.

Various indicators may be used to track income inequality. For example, the Gini coefficient summarises income inequality into a single number between 0 and 100%. Other indicators discussed in this briefing paper include the ratio of incomes for individuals at different points on the household income distribution (how does the income of someone with a relatively high income compare to that of someone with a relatively low income?), and the share of total income going to different groups of households. By looking at these different indicators together, a more complete picture of income inequality is obtained.

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 lower than in the United States.

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