The effect of taxes and benefits on UK inequality

Document type
Briefing
Author(s)
Bourquin, Pascale; Waters, Tom
Publisher
Institute for Fiscal Studies
Date of publication
27 May 2019
Series
IFS Briefing note; BN249
Subject(s)
Social Policy, Poverty Alleviation Welfare Benefits and Financial Inclusion, Employment
Collection
Social welfare
Material type
Reports

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Briefing on taxes and income inequality.

Benefits reduce UK income inequality more than direct taxes do. Before redistribution, the highest-income fifth of individuals, on average, has an income that is 12 times as large as the poorest fifth. Adding all cash benefits and deducting direct taxes (including income and council taxes as well as employer and employee National Insurance contributions) brings this figure down to 5. Benefits account for around 80% of this reduction, while direct taxes account for 20%.

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