Incomes rise by more than inflation in welcomed household budget boost | Personal Finance | Finance

Living standards and incomes are continuing to show small signs of improvements, according to a new study.

The amount of disposable income that the average household has left each after covering essentials is up by £18.56 on a year ago to £231, according to the Asda Income Tracker.

This increase, which amounts to 8.7 percent in February 2024 versus the same month last year, was largely driven by a rise in incomes and a slowdown in core inflation.

Imminent policy changes, including the reduction to National Insurance contributions, a rise in pensions and the National Living Wage are expected to offer a further boost.

Discretionary income is a measure of the amount of money a household has left after paying taxes and buying essential items such as groceries, electricity, gas, transport costs and mortgage interest payments or rent.

The study puts the average household income at £987 per week with £604 going on essential spending and £152 in taxes. That leaves £231 for other things.

Significantly, the lowest-earning households saw their gross weekly income grow for the first time in over two years.

The figure for this group was up 6.8 percent to £208.

Despite this, this group’s finances “remain in negative territory, indicating that their net income is insufficient to cover essential spending”.

The study shines a light on huge disparities between the wealthiest and poorest sections of the population.

The figures show an average household gross income of £208 for the poorest 20 percent of households, which compares to £2,436 for the richest 20 percent.

Sam Miley, Managing Economist and Forecasting Lead at Cebr who produces the Income Tracker on behalf of Asda, said: “The Income Tracker has been improving for almost a year now, with households continuing to recover from the depths of the cost-of-living crisis.

“A particularly sharp uptick is expected to take place from April when inflation will ease significantly off the back of lower household energy bills.

“This will help to support spending power and consumer activity.”