Income inequality in the UK fell in 2011/12

Income inequality fell between 2010/11 and 2011/12 as earnings fell for higher income households and welfare changes were implemented, according to data from the Office for National Statistics (release).

In 2011/12, the average income before taxes and benefits was £31,500. The top fifth of households earned an average income of £78,300 – 14 times that of the bottom fifth with an average of £5,400. The ratio was 16 to one in 2010/11, indicating that income inequality fell over the period.

Taking into account all taxes and benefits, the average household earned £31,297 in 2011/12. The richest fifth of households, earning £57,325, earned 3.6 times the poorest fifth £15,823.

On average, households paid a fifth of their gross income in direct taxes such as income tax and council tax. This rose to a quarter for the richest fifth and fell to ten per cent for the poorest fifth.

However, the bottom fifth of households paid an equivalent of 26 per cent of their
gross income in indirect taxes on expenditure like VAT and fuel duty, while the top fifth paid just 11 per cent. The figures show that the proportion of income paid in taxes was roughly equal for those at both extremes of income.

But poorer households were much more likely to receive cash benefits. Once these had been taken into account, the richest fifth were earning six times more than the poorest fifth in 2011/12 - down from a seven to one ratio the year before.