The Effects of Taxes and Benefits on Household Income, Financial Year Ending 2014

29 Jun 2015 02:31 PM

Main points

• Before taxes and benefits the richest fifth of households had an average income of £80,800 in 2013/14, 15 times greater than the poorest fifth who had an average income of £5,500.
• Overall, taxes and benefits lead to income being shared more equally between households. After all taxes and benefits are taken into account the ratio between the average incomes of the top and the bottom fifth of households (£60,000 and £15,500 per year respectively) is reduced to four-to-one.
• Cash benefits made up 57.2% of the gross income of the poorest fifth of households (£7,400), compared with 3.5% (£2,900) of the income of the richest fifth.
• The richest fifth of households paid £29,200 in taxes (direct and indirect) compared with £4,900 for the poorest fifth, though both groups paid a broadly similar proportion of their gross income (34.8% and 37.8% respectively).
• Overall, 51.5% of households received more in benefits (including in-kind benefits such as education) than they paid in taxes in 2013/14. This is equivalent to 13.7 million households. This continues the downward trend seen since 2010/11 (53.5%) but remains above the proportions seen before the economic downturn.
• Overall levels of income inequality in 2013/14 were broadly unchanged on other recent years. However, inequality among retired households has increased, with the Gini coefficient for disposable income rising to 27.2%, up from 24.3% in 2009/10.
• The median disposable income of retired households was 7.3% (£1,400) higher in 2013/14 than in 2007/08, after accounting for inflation and household composition, compared with 5.5% (£1,600) lower for non-retired households.
• Overall median disposable income in 2013/14 was £24,500 – higher than in 2012/13, after accounting for inflation and household composition, but still below the level seen in 2007/08.

Get all the tables for this publication in the data section of this publication.