How have household incomes evolved over your lifetime? What is the gap between rich and poor? How many people are there in poverty? Which groups are most likely to face poverty? These questions are fundamental to understanding the living standards of households across the UK, and have long been the subject of research at IFS.
Here we provide the latest data on household incomes, poverty rates and income inequality, based on the methodology used in DWP's official HBAI statistics.
We measure household income by adding up different sources of income such as earnings from employment or self-employment, benefits, pension income and interest from savings, and then deducting taxes (income tax, National Insurance contributions, and local taxes, e.g. council tax).
We adjust incomes with inflation to show real incomes in 2022-23 prices and rescale or ‘equivalise’ incomes to account for the fact that households of different sizes and compositions have different needs. Throughout, we show two versions of household incomes: one before housing costs are deducted and one after housing costs are deducted.
This chart shows the median (middle) annual household income for different groups in the UK. Click on the household groups in the legend to toggle them on and off and compare how the incomes of different groups have changed over time. For example, the median household income for pensioners tells us the total household income for the middle pensioner in the population. Switch between the top tabs to see how these incomes change before and after deducting housing costs.
Poverty rates summarise how low-income households’ living standards have changed over time. They measure the proportion of people with incomes below a poverty line threshold. There are two main measures we use, absolute and relative poverty, which we explain below. We usually look at incomes after housing costs are deducted when measuring poverty, as this measure can be better at identifying those with low living standards. There are a few theoretical reasons why comparing income with housing costs deducted might be a better way of comparing living standards in some cases, detailed on the methodology page.
One downside of these sorts of ‘headcount’ poverty measures is that they only show the number of people below the poverty line – and do not vary with the depth of poverty. In other words, a household whose income is £1 below the poverty line shows up as ‘in poverty’ in just the same way as a household with no income at all. Relatedly, any poverty line is necessarily arbitrary – the living standards a household experiences will not change much as it moves from just below to just above a poverty line. For this reason, changes in the poverty rate over time, or differences between groups, are more informative than the headline level of poverty at any point in time.
Absolute poverty is the proportion of people whose household incomes are below a poverty line that is fixed over time. The official absolute poverty line, which we use below, is 60% of the 2010 inflation-adjusted median income.
Relative poverty is the proportion of people whose household incomes are below a poverty line that changes over time to reflect average living standards. The official relative poverty line, which we use below, is 60% of contemporaneous median income.
Income inequality describes how evenly or unevenly income is distributed across a population.
It can take lots of different forms and there are lots of ways of measuring it.
A good way to investigate income inequality is to first split the population into income percentiles. For example, to be at the 10th income percentile, you’d need to have a household income higher than the bottom 10% of the population, but lower than the other 90%, meaning you would be near the bottom of the income distribution.
This chart is known as a ‘Pen’s parade’ and shows the level of income at each percentile of the distribution. It is useful for comparing the household incomes of richer and poorer people. Use the slider to show the Pen’s parade in different years, to see visually how inequality has changed over time.
Another way to see how income inequality has changed over time is the following chart – known as a ‘growth incidence curve’. This shows the average annual percentage growth in incomes at each percentile of the income distribution, for selected time periods. Enter a date range between 1961 and 2022 in the search box in the chart below to see how income growth varied across the distribution over that period.
Rather than working out how all the parts of the income distribution have changed, there are lots of measures that allow us to summarise different types of inequality in different ways. Each has various advantages and disadvantages.
Percentile ratios are the ratios of different percentiles of the income distribution to each other.
For example, the 90:10 ratio compares the 90th percentile of incomes (the income of the person richer than 90% of the population) with the 10th percentile (the income of the person richer than 10% of the population). The higher the number, the greater the income inequality is between these two groups.
Percentile ratios are useful for showing which parts of the income distribution are becoming more unequal. A growing 90:50 ratio means there is a widening gap between those near the top of the income distribution and those in the middle. A growing 50:10 ratio means there is a widening gap between those on middle incomes and those near the bottom of the distribution.
The Gini coefficient is a popular summary measure which takes account of incomes right across the distribution.
A perfect equality score would be a Gini of 0 (everyone has the same household income) and a perfect inequality score would be a Gini of 1 (one person has all the household income). The higher the Gini score, the more income inequality there is.
But the Gini score is only a broad summary – there’s lots it doesn’t tell us. If the Gini increases, this might be because inequalities increase across the income distribution. Or it might be because inequality between the very top and everyone else has increased but gaps elsewhere have remained the same.
Top income shares show how much income is held by households in the top of the income distribution.
If there was no income inequality, those with incomes in the top 10% would have 10% of the country’s total income. The higher the share of income this top 10% have, the more inequality there is between them and the rest of the income distribution.
However, the very highest incomes are difficult to capture and measure using survey data, so estimates of income shares of the very top are likely to be less precise than some other measures. (See the methodology page for details of adjustments we make to at least partially account for this.)
This section looks at inequality between and within the regions and nations of the UK, a subject of continuing public debate (see Levelling up).
The UK’s nations and regions have significant differences in housing costs, meaning that median incomes can change drastically once housing costs are deducted.
These maps show the median (middle) income of each region and compare it with the UK-wide average.
The left-hand map shows the disparities in terms of total disposable income before housing costs are deducted. The right-hand map shows the same for incomes after housing costs are deducted, and reflects that even though a region may have a relatively high total average income, incomes may not be as high once you account for housing costs.
Hover over or click on the different regions to see their median household incomes before and after housing costs.
Even aside from the issue of differing housing costs, regional inequality is not a straightforward story of richer regions and poorer regions.
A region that is rich on average might still contain a significant proportion of poorer households, and vice versa.
The following four maps show the percentage of people who are in poverty and the percentage of people who are in the richest 10% of the UK-wide income distribution in each region, both before and after deducting housing costs.
Hover over or click on the different regions to compare.
This glossary summarises some of the key concepts that are important to understanding the household income charts on this page.
Our methodology page contains much more detailed information on the calculations behind the statistics, and our data spreadsheet provides more data on household incomes.
Larger households require more income to attain the same material living standards as smaller households. Therefore we equivalise incomes, meaning we adjust them to reflect different household sizes. If two households of different sizes had the same unequivalised income, the larger one would have lower equivalised income since that income must be shared amongst more people. We don’t just divide by the number of people, as there are economies of scale from living with others. Different scales are used depending on whether we look at incomes before or after deducting housing costs.
Throughout we equivalise so that incomes reflect the amount for a childless couple. This means that a family of any size with £30,000 equivalised income should have the same material standard of living as a childless couple on £30,000.
The Gini coefficient is a summary measure of inequality, which is affected by incomes across the income distribution.
Calculating and interpreting the Gini is complicated. To calculate it, you must calculate the difference in equivalised household incomes between every possible pair of individuals, take the mean of these and divide it by the overall mean income.
But the important thing to remember is that, broadly speaking, the higher the Gini score, the more income inequality there is. A perfect equality score would be a Gini of 0 (everyone has the same household income) and a perfect inequality score would be a Gini of 1 (one person has all the household income and everyone else has zero).
Household income is the sum of a household’s incomes from various sources such as earnings, pensions, benefits and savings, less the taxes it pays. For each individual we report their equivalised household income, implicitly assuming that income is shared equally between household members when using it to measure standards of living. All members of the household, including adults and children, will be allocated the same equivalised household income. By ‘household’ we mean everyone living in a property, whether or not they are the same family.
When we analyse housing costs, we include (where applicable) rent, payments of mortgage interest, service charges, ground rent and service charges, buildings insurance and water rates.
Repayments of the principal on a mortgage are not included. There are arguments for and against this approach, which is standard when calculating poverty statistics, but the main reason for omitting these payments is that they are akin to saving, and the wealth built up could be used for consumption in the future (e.g. if a household downsizes or uses an equity-release product).
The median is a type of average. The median income is the income of the person in the middle of the income distribution – half are richer than them and half are poorer. Unlike the mean income, which can be driven by very high incomes, the median income can be thought of as a ‘typical’ income.
Income percentiles, such as the 10th or 60th percentile, tell us about incomes at other points in the distribution. For example, 60% of people have a household income less than the 60th income percentile and 40% have more than this.
Throughout this page we look at real incomes, meaning that we deflate to account for inflation. This is because we want to use income to measure material standards of living, but a given amount of income does not have the same purchasing power over time.
As an example, if ‘nominal’ incomes (the cash amounts people actually see) increase by 5%, but prices increase by 2%, then real incomes only increase by roughly 3%, meaning households can purchase 3% more goods and services. We report incomes over time in terms of 2022-23 prices.
We use a measure of inflation that includes mortgage interest and rents for incomes before deducting housing costs, and a different measure that excludes these for incomes after deducting housing costs.
This spreadsheet allows the public to see how different measures of living standards, poverty and inequality have evolved over time. It combines data from DWP’s Households Below Average Income series from 1994-95 with data produced by IFS researchers to measure incomes and the distribution of income in Britain since 1961.
Figures since 1961 are given for: household incomes, income inequality, poverty, child poverty, pensioner poverty, poverty for working-age parents and poverty for working-age non-parents.
IFS researchers produce new research frequently to keep the analysis of the UK income distribution up to date. Our reports analyse trends to gain a greater understanding of why incomes have been changing in recent years, and take deep dives into specific issues such as child poverty, cost of living payments, or housing affordability for low-income renters.
