Disposable income is the amount of cash individuals have left over after all taxes are deducted. On average, each person has seen a 1% drop in the amount they have to spend since the last quarter.
The fall in disposable income has led to a drop in savings levels as families dig deep to fill the gap.
The ONS attributes the drop to a number of reasons. Firstly, because income per head, before tax and services, fell by 0.6% since the previous quarter. This signals the lowest income level since 2005. This was caused by weakened pay as companies cut back as a result of the UK’s financial crisis.
Secondly, because of population growth. The ONS report said: “Finally, sustained population growth led to incomes being spread across a greater number of people, and therefore further reduced the growth of actual income per head.”
It is thought that, on average, people have a weekly disposable income of £273. ONS data shows that families are cutting back on their spending and saving less.
Financial instability has led to an increase in people prioritising the repayments of loans, mortgages and other debts in order to avoid getting into further trouble.
To find out how an accountant could help you to get control over your finances and advise you on how to get the most out of your savings, please visit our page on Personal Finances.
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