Income inequality is getting worse, according to Hargreaves Lansdown, as the poorest fifth are getting poorer, with their average disposable income shrinking by 1.5% in a year, largely caused by benefit cuts.

Hargreaves Lansdown calculated that the poorest fifth of households received £440 less in cash benefits than a year earlier. In comparison, the richest fifth of people in the UK are getting richer, receiving 7.5% more disposable income, largely caused by wage increases.

Commenting on the data, Hargreaves Lansdown personal finance analyst Sarah Coles said: “The gulf between the richest and poorest in the UK is growing, with the wealthiest fifth of the UK enjoying a boom in disposable income, and the poorest fifth facing a cut.

“The most damaging change for poorer households is a benefit cut of £440, while a tax rise of £83 didn’t help either. Richer households, meanwhile, face higher taxes – up £1,300 on average - but this is more than offset by rising wages.

“Widening inequality is actually a reversal of a longer-term trend, because over the past ten years (partly because of the minimum wage), the income of poorest in the UK has grown at more than twice the rate of the richest.”

According to figures published by the Office for National Statistics, median household disposable income in the UK was £28,400 in the financial year ending 2018, remaining largely unchanged when compared to the previous year. However, when taking inflation and changes in household composition, median income has now been rising by an average of 2.2% a year since financial year end 2013.

“Overall we’re not getting any better off. The average (median) disposable income is £28,400, which is roughly the same as last year when you take inflation into account. Over the past five years we had got used to our income rising 2.2% faster than inflation, so we all need to work hard to stop our spending creeping up beyond our means and creating a debt headache further down the line,” Coles said.

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