Effects of Taxes and Benefits on Household Income, 1977-2020

<p><br></p> <p>This analysis, produced by the Office for National Statistics (ONS), examines how taxes and benefits redistribute income between various groups of households in the United Kingdom. It shows where different types of households and individuals are in the income distribution and looks at the changing levels of income inequality over time. The main sources of data for this study are:</p><ul><li>Family Expenditure Survey (FES) from 1977-2001</li><li>Expenditure and Food Survey (EFS) from 2001-2007</li><li>Living Costs and Food Survey (LCF) from 2008 to 2017</li><li>Household Finances Survey (HFS) from 2018 onwards<br></li></ul><p>Some variables have been created by combining data from the LCF (previously FES or EFS) with control totals from a variety of different government sources, including:</p><ul><li>United Kingdom National Accounts (ONS Blue Book)</li><li>HM Revenue and Customs (HMRC)</li><li>Department for Transport (DfT)</li><li>Department of Health (DH)</li><li>Department for Education and Employment (DfEE)</li><li>Department for Communities and Local Government (DCLG)</li></ul><p>For further information, see the ONS <a href="https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/theeffectsoftaxesandbenefitsonhouseholdincome/previousReleases" title="Effects of taxes and benefits on household income" target="_blank" style="background-color: rgb(255, 255, 255);">Effects of taxes and benefits on household income</a> webpage.</p><p><span style="font-weight: bold;">Users should note that these combined ETB household (1977-2020) and person (2018-2020) datasets replace all previous individual year files, which have been withdrawn from use at the depositor's request.</span></p><p></p><p><span style="font-weight: bold;">Method of Data Collection</span><span style="font-weight: 700;"><br></span>The ETB has been produced each year since 1961 and is an annual analysis looking at how taxes and benefits affect the income of households in the UK.</p><p>Since 2018, the estimates in this analysis are based on data derived from the HFS Survey (the HCF is not currently held by the UK Data Service). The HFS is an annual survey of the expenditure and income of private households. People living in hotels, lodging houses, and in institutions such as old people's homes are excluded. Each person aged 16 and over keeps a full record of payments made during 14 consecutive days and answers questions about hire purchase and other payments; children aged 7 to 15 keep a simplified diary. The respondents also give detailed information, where appropriate, about income (including cash benefits received from the state) and payments of Income Tax. Information on age, occupation, education received, family composition and housing tenure is also obtained. The survey is continuous, interviews being spread evenly over the year to ensure that seasonal effects are covered. The Family Spending publication also includes an outline of the survey design.</p><p>The HFS data used in this analysis are grossed so that totals reflect the total population of private households in the UK. The weights are produced in two stages. First, the data are weighted to compensate for non-response (sample-based weighting). The non-response weights are then calibrated so that weighted totals match population totals for males and females in different age groups and for different regions and countries (population-based weighting). The results in the analysis are weighted so that statistics represent the total population in private households in the UK based on 2011 Census data. In 2013/14, an additional calibration to the Labour Force Survey (LFS) employment totals was also applied.</p><p>There are a number of different measures of income used, the most common of which is probably household disposable income. This is the total income households receive from employment (including self-employment), income from private pensions, investments and other sources, plus cash benefits (including the state pension), minus direct taxes (including income tax, NI and council tax). Income is normally analysed at the household level as this provides a better measure of people's economic well-being; while income is usually received by individuals, it is normally shared with other household members (e.g. spouse/partner and children).</p><p>In 2018/19 a further adjustment was applied to the data to adjust for the under coverage and under-reporting of income of the richest individuals. This method is often referred to as the 'SPI adjustment' owing to its use of HM Revenue and Customs (HMRC's) Survey of Personal Incomes (SPI). For further details please see the ETB <a title="Quality and Methodology Information" href="https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/methodologies/theeffectsoftaxesandbenefitsonukhouseholdincome" style="background-color: rgb(255, 255, 255);">Quality and Methodology Information</a> webpage and the <a title="Effects of Taxes and Benefits on Household Income Technical Report" href="https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/articles/theeffectsoftaxesandbenefitsonhouseholdincome/financialyearending2019" style="background-color: rgb(255, 255, 255);">Effects of Taxes and Benefits on Household Income Technical Report</a>.</p><p><span style="font-weight: bold;">Data Sources</span></p><p>The Household Finances Survey (HFS) is the source of the microdata on households from 2018 onwards. Previously, the Living Costs and Food Survey (LCF) was the data source. Derived variables are created using information from HFS and control totals from a variety of different government sources including the United Kingdom National Accounts (ONS Blue Book), HM Revenue and Customs, Department for Transport, Department of Health, Department for Education and Employment, and Department for Communities and Local Government.<br></p><p><span style="font-weight: bold;">Secure Access version</span><br></p><p>A Secure Access version of the ETB is available from the UK Data Archive under <a href="https://beta.ukdataservice.ac.uk/datacatalogue/studies/study?id=8253" target="_blank">SN 8253</a>, subject to stringent access conditions. The Secure Access version includes variables that are not included in the standard End User Licence (EUL) version, including case number, age and economic position of chief economic supporter, and government office region. Users are strongly advised to check whether the EUL version is sufficient for their needs before considering an application for the Secure Access version.</p><p><span></span></p>