Incomes and inequality

The Labour Party plans to increase income tax for individuals with annual taxable incomes over £80,000. Under the current system, income tax is payable on incomes above the personal allowance of £12,500 a year. The 40% higher rate becomes payable at £50,000, and the 45% additional rate kicks in at £150,000. Labour would introduce a new 45% income tax rate starting at £80,000 a year, and a new 50% rate starting at £125,000, from 2020–21.

This briefing note, released as part of the IFS's pre-election analysis, provides key information about minimum wages in the next parliament.

This note has been written in the run-up to the 2017 general election. IFS Election 2017 analysis is being produced with funding from the Nuffield Foundation as part of its work to ensure public debate in the run-up to the general election is informed by independent and rigorous evidence.

This election briefing note looks at the impact of tax and benefit reforms on household incomes.

We use data on household incomes from the Family Resources Survey, together with OBR macroeconomic forecasts and announced changes in tax and benefit policy, to project household incomes up to 2021–22.

The focus of this report is the distribution of household income in the UK. We assess the changes to average incomes, income inequality and poverty that occurred in the latest year of data (2014–15), and put these in historical context using comparable data spanning the last 50 years.

The Department for Work and Pensions (DWP) has today published the latest official statistics on household incomes, covering the financial year 2015–16. IFS researchers have summarised the headline trends observed in the new data and placed them in historical context in order to understand better changes in living standards in recent years.