Households are nearly 9% worse off than they were before the pandemic, according to new data from the Office for National Statistics, which show the combined effects of higher taxes and inflation have eroded disposable incomes.
Figures published by the ONS reveal that median real post-tax household income fell from £32,227 in the financial year ending 2021 to £29,382 in 2024. The measure, which adjusts for inflation and includes both direct and indirect taxes, indicates that the typical household has seen its spending power cut by 8.8% in just three years.
Jason Hollands, managing director at wealth manager Evelyn Partners, said the findings confirm what many families already sense. “If many households across the UK are feeling worse-off than they were a few years ago then they are probably right.
“These figures reveal the crushing impact of taxes and inflation on spending power – and therefore the standard of living – over a relatively short period after the pandemic.”
FISCAL DRAG AND INFLATION
Hollands pointed to what he described as a “pincer-like offensive” on households, with frozen thresholds and allowances dragging more earnings into tax, while consumer prices rose sharply.
“Three years of high inflation and a tax burden fattened by fiscal drag left the average household 9% poorer by April 2024, after inflation and both direct and indirect taxes are taken into account,” he said.
He noted that while the ONS figures suggested some stabilisation in 2024, as inflation eased and real wages edged higher, the pressures had not disappeared.
“Resurgent inflation this year, the continued freeze on tax thresholds, and the dampening effect of the employer NIC hike mean that we will probably see real post-tax incomes deteriorate further.”
CHANCELLOR’S CHALLENGE
The data underlines the task facing the Chancellor, who has pledged to “put more money in working people’s pockets” ahead of the general election. With fiscal drag set to raise billions more in revenue for the Treasury, households are unlikely to feel any relief soon.
The ONS explained that its equivalised income measure accounts for household size and composition, ensuring comparability across different household types.
