Median UK household income after taxes and benefits fell 4.7% in FYE 2023

Median equivalised household income after all taxes and benefits fell by 4.7 per cent in real terms between the financial year ending (FYE) 2022 and FYE 2023, the Office for National Statistics (ONS) said on 19 December 2024. Mean equivalised final income fell by 5.3 per cent over the same period¹. The ONS said the decrease continues a downward trend over the last three financial years, following a large increase between FYE 2020 and FYE 2021¹. FYE 2023 covers April 2022 to March 2023¹.

Before taxes and benefits, median equivalised household income was £37,300, rising to £39,700 after taxes and benefits¹. The richest fifth of people had mean equivalised household income before taxes and benefits of £114,300, 11.6 times the poorest fifth's £9,800. After cash benefits and direct taxes this narrowed to £82,900 for the richest fifth, 5.5 times the poorest fifth's £15,000. After all taxes and benefits, average final incomes were £82,200 and £24,500 respectively, a ratio of 3.4¹.

Measure, FYE 2023	Richest fifth	Poorest fifth
Mean equivalised income before taxes and benefits	£114,300	£9,800
After cash benefits and direct taxes	£82,900	£15,000
Average equivalised final income	£82,200	£24,500

Original income inequality, before taxes and benefits, fell by 2.9 percentage points to 47.2 per cent since FYE 2022, while final income inequality, after taxes and benefits, fell by only 2.1 percentage points to 27.7 per cent. The ONS said both were the lowest in 10 years, and that the redistributive effect of taxes and benefits decreased marginally between years¹.

Cash benefits rose nominally by 8.9 per cent between FYE 2022 and FYE 2023 but were unchanged in real terms. The ONS said that without cost of living payments the average UK household would have seen a real-terms reduction of 2.8 per cent in cash benefits. Cash benefits for the poorest fifth fell 0.5 per cent in real terms, while the richest fifth saw a 7.2 per cent increase, which the ONS attributed to cost of living payments and an increase in disability related benefits¹. Cash benefits reduced income inequality by 9.5 percentage points, from 47.2 per cent for original income to 37.7 per cent for gross income, compared with a 9.4 percentage point reduction in FYE 2022¹.

Direct taxes rose nominally by 1.2 per cent on average, a real-terms decrease of 7.1 per cent. The poorest fifth saw a nominal increase of £830, or 29.7 per cent, in direct taxes, and a real-terms increase of 19.0 per cent; the richest fifth saw a nominal decrease of £2,490, or 5.6 per cent, and a real-terms decrease of 13.4 per cent. Income Tax thresholds, including the personal allowance and the higher-rate threshold, were frozen at 2022 levels during this period¹.

The proportion of people in households receiving more in benefits than they paid in taxes fell from 53.6 per cent to 52.6 per cent, continuing a downward trend after a sharp increase during the coronavirus pandemic in FYE 2021¹. The ONS also said Household Finances Survey weights had been updated in line with Census 2021 population totals for private households and student accommodation¹.

Why it matters for households

The figures describe the financial year from April 2022 to March 2023, so they record what happened to household incomes during that period rather than current incomes. They cover income after direct taxes such as Income Tax and National Insurance, indirect taxes such as VAT and duties, cash benefits and benefits in kind such as the NHS and education, which the ONS calls final income¹.

The fall in median final income means the middle household had less income after taxes and benefits, in real terms, than a year earlier. The ONS said the poorest fifth's original income rose in real terms by 9.1 per cent, largely from a 10.5 per cent increase in wages and salaries, while the richest fifth's fell by 10.6 per cent, with wages and salaries down 11.5 per cent¹. The ONS also reported that the National Living Wage rose nominally by 6.6 per cent and the Real Living Wage by 10.1 per cent over the period, with one in nine UK workers employed by living wage employers as of July 2023¹.

Because the figures are for FYE 2023, they do not reflect tax, benefit or wage changes since March 2023. The ONS has not reported when the next release will be published¹. For background on how incomes, prices and interest rates interact, see the site's rates and economy coverage.