Income inequality in the UK

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 35% before housing costs and 39% after housing costs in 2022/23.

A couple without children with disposable income below £300 per week before housing costs were lowest-income 10% of households in 2022/23. To be in the highest-income 10% required an income four times higher, of at least £1,200 per week.

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.

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 2024 that real household disposable income per person, a measure of living standards, will increase by 0.1% in 2024 and then by 1.7% in 2025. Based on these forecasts, real (inflation-adjusted) post-tax income per person will return to its pre-pandemic level (Q4 2019) in Q4 2025.

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

According to the Resolution Foundation, in 2023/24 real incomes will be relatively stable across the income distribution, but in 2024/25, there will be a 1% fall for households with the bottom half of incomes (not including pensioners) and a 1% rise for the top half. This will mean a sharp increase in the Gini coefficient in 2024/25.

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 (£553) had the lowest median income before housing costs in 2020/21 to 2022/23, while London (£735) had the highest. Households from a Bangladeshi ethnic group (£416) had the lowest median incomes before housing costs while households from an Indian ethnic group (£700) had the highest. Families with a disabled member had a median income of £549 before housing costs during this period, compared to £682 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.