High Earners Not Rich Yet (HENRY) households are set to experience a significant squeeze on real incomes over the coming years, with annual purchasing power expected to fall by more than £15,000 by 2029, according to analysis IG.
The research, based on the latest HM Treasury data, examined the combined impact of tax threshold freezes, welfare policies and public spending decisions across all household income deciles through to the end of the current Spending Review period in 2028/29.
IG’s analysis showed that top-decile earners, with an average income of £103,700, face an average reduction in real purchasing power of £15,658 by 2029 once inflation and fiscal drag are taken into account.
Mid-high earners in the ninth decile, earning an average of £65,700, are projected to see a reduction of £8,953 over the same period.
While adults in the ninth income decile received no net support from the Budget, those in the top decile face an average net annual income impact of –0.3%.
This contrasts sharply with lower-income households: the bottom decile, with an average income of £13,100, is estimated to receive an annual income boost of more than 7%, while those in the fifth decile, earning around £31,400, will see an increase of over 2%.
Chris Beauchamp, chief market analyst at IG, said: “While the Chancellor met her fiscal rules and avoided increases to income tax or national insurance, the combination of policy measures and frozen thresholds will have a disproportionately large effect on HENRY households.
“As the name suggests, many in these income bands carry high living costs and wouldn’t recognise themselves as ‘rich’. Once inflation and fiscal drag are factored in, the squeeze on real disposable income will feel significant, forcing some households to reassess spending, saving and long-term financial plans.
“In this environment, households in this bracket should be motivated to become more engaged with investing as they recognise that growing and protecting whatever wealth they can is increasingly crucial.
“However, there is also the risk that squeezed disposable incomes limit how much households can invest – something the government should consider as part of its drive to get more Brits investing.”
