This supplementary material is intended to provide further analysis on The Effects of Taxes and Benefits on Household Income 2012/13, and to illustrate how these data are derived. It follows a similar structure to the statistical bulletin and also provides details on the methodology, concepts, sources and information on their quality.
The five stages of redistribution of income can be summarised as follows:
Household members begin with income from employment, private pensions, investments and other non-government sources. This is referred to as original income.
Households then receive income from cash benefits. The sum of cash benefits and original income is referred to as gross income.
Households then pay direct taxes. Direct taxes, when subtracted from gross income is referred to as disposable income.
Indirect taxes are then paid via expenditure. Disposable income minus indirect taxes is referred to as post-tax income.
Households finally receive a benefit from services (benefits in kind). Benefits in kind plus post-tax income is referred to as final income.