Cash benefits for the poorest fifth of UK households remained in line with the financial year ending (FYE) 2022 after accounting for inflation, the Office for National Statistics (ONS) said in a bulletin published on 19 December 2024, largely attributing this to the effect of cost of living payments1.
The bulletin covers FYE 2023, which ran from April 2022 to March 2023. Across all UK households, cash benefits rose nominally by 8.9% between FYE 2022 and FYE 2023, but after inflation they were equivalent between the two years. The ONS said that without the cost of living support schemes, the average UK household would have seen a real-terms reduction of 2.8% in cash benefits for FYE 20231.
The picture differed across the income distribution. Cash benefits for the poorest fifth fell by 0.5% in real terms, while the richest fifth saw a 7.2% increase, which the ONS attributed to cost of living payments and a rise in disability related benefits1.
"Cash benefits for the poorest fifth of households remained in line with FYE 2022 after accounting for inflation, largely attributed to the effect of cost of living payments."
Median equivalised household income before taxes and benefits was £37,300, rising to £39,700 after taxes and benefits1. The richest fifth had mean equivalised original income of £114,300, 11.6 times the poorest fifth's £9,800. After all taxes and benefits, average final incomes were £82,200 and £24,500 respectively, a ratio of 3.41.
| Measure, FYE 2023 | Poorest fifth | Richest fifth |
|---|---|---|
| Mean equivalised original income | £9,800 | £114,300 |
| Mean equivalised final income | £24,500 | £82,200 |
Original income inequality fell by 2.9 percentage points to 47.2%, while final income inequality fell by 2.1 percentage points to 27.7%, which the ONS said showed the redistributive effect of taxes and benefits decreased marginally between years1. Median equivalised final income fell 4.7% in real terms and mean final income fell 5.3%1.
The proportion of people in households receiving more in benefits than they paid in taxes fell from 53.6% to 52.6%, continuing a downward trend after a sharp increase during the coronavirus pandemic in FYE 20211.
Why it matters for households
The figures describe the year in which the first cost of living payments were made. For the poorest fifth of households, the combined effect of wages, benefits and taxes left cash benefits level with the previous year once inflation was taken into account, rather than falling in real terms as they would have without the payments1.
The same period saw real-terms falls in income after all taxes and benefits: median final income was down 4.7% and mean final income down 5.3% on FYE 20221. Direct taxes for the poorest fifth rose 19.0% in real terms, which the ONS linked largely to higher wages and salaries, while the richest fifth saw a 13.4% real-terms decrease1. Income Tax thresholds, including the personal allowance and the higher-rate threshold, were frozen at 2022 levels during the year1.
The ONS also noted that cash benefits reduced income inequality by 9.5 percentage points in FYE 2023, from 47.2% for original income to 37.7% for gross income, compared with a 9.4 percentage point reduction in FYE 2022, saying the role of cash benefits in reducing inequality has lessened over recent years1.
What happens next
The ONS lists the next release date for this bulletin as to be announced1. The bulletin is not the latest release in the series, and the ONS links to a newer edition1.
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