High earners say they don't feel wealthy as disposable income stalls, hitting consumer spending

Many people who earn substantial salaries report they do not feel wealthy, even as official measures of accumulated wealth remain high for some households. Economists and behavioural researchers say the disconnect reflects a squeeze on disposable and discretionary income after taxes and essentials, a dynamic that is denting spending at restaurants, pubs and shops.

Household wealth in Great Britain is concentrated in a few forms that are not easily spent day to day: property, private pensions, savings and investments, and physical possessions. The Office for National Statistics breaks household wealth into those components, showing roughly 40% tied up in property, 35% in private pension wealth, 14% in savings and investments and 10% in physical assets, after debts are deducted. For many families, those assets cannot be converted into everyday spending power.

Income, rather than accumulated wealth, often determines whether people feel ‘‘rich’’ in their everyday lives. A salary and earnings calculator published alongside analysis of official figures illustrates how pay compares locally and by profession: someone earning £50,000 a year sits above about 76% of earners, while a £100,000 salary puts someone in roughly the top 6% of earners. Yet surveys and anecdotal reports show many of those workers say they must curtail spending on leisure and takeaways.

That paradox reflects two linked pressures. First, household disposable income — the money left after direct taxes such as income tax, national insurance and council tax — has not recovered to pre-2020 levels when adjusted for inflation. The ONS reported that median household disposable income, adjusted for inflation, was broadly steady for the financial year ending 2024 but remained lower than in 2020 and roughly comparable with levels from two decades earlier.

Second, even where disposable income is positive, discretionary income — the funds remaining after essential costs such as housing, utilities, food, transport and debt service — is thin for many households. A tracker from supermarket chain Asda divided households into income fifths and found the lowest fifth typically ended the week with a deficit averaging £73. Middle-income households averaged £91 a week of discretionary cash. The fourth and fifth quintiles fared better at £289 and £916 a week, respectively, but those amounts must cover non-essentials, saving, investing and occasional large purchases.

For a typical family with two adults and two children, Asda's figures imply roughly £1,189 a month of discretionary income for the household at the £289-per-week level, or about £594 per adult — roughly £150 a week each — to spend on non-essential items and still try to save. Those sums shrink further once rising bills, mortgage or rent costs and council tax are taken into account.

Policymakers and analysts point to tax and fiscal settings as part of the explanation. National insurance rates have been cut in recent years, but frozen thresholds for income taxes and other levies mean more income crosses higher-rate bands as nominal wages rise, a phenomenon often described as a tax squeeze. Council tax and other local levies have also absorbed a greater share of household budgets in many areas.

The result has been a cautious approach to consumer discretionary spending. Hospitality and leisure businesses report weaker trade as households prioritise essentials and saving over meals out and leisure activities. Retailers and restaurateurs say customers are choosing cheaper options, cutting frequency, or forgoing outings altogether, a trend that industry figures warn could slow broader economic growth.

Business leaders have urged the government to take steps to boost consumer confidence and spending. In recent days, executives including the boss of John Lewis and Lord Stuart Rose have publicly warned policymakers about the risks to the consumer economy if households' financial headroom does not recover.

Behavioural factors amplify the effect. Studies in behavioural finance show people often overestimate peers' earnings, which can undermine their sense of personal affluence even when their income is high relative to the population. Tools that let people compare their pay with local and national averages can alter perceptions: the salary calculator accompanying the latest analysis allows users to input salary, self-employment profits or pension income to see how they rank by town, job and across the UK, and to estimate the proportion of income eaten by tax.

The empirical portrait is mixed. While asset-rich households — particularly those with large property holdings or private pensions — register substantial measured wealth, much of that value is illiquid and cannot offset day-to-day cost pressures. At the same time, nominal salaries have increased for many, but climbing costs for housing, energy, transport and local taxes, alongside frozen tax thresholds, mean take-home and discretionary income have not kept pace with expectations.

The divergence between headline wealth and day-to-day spending power helps explain why some higher earners express surprise that they ‘‘do not feel rich.’’ For businesses dependent on discretionary spending, the trend presents a strategic and political challenge: sustaining sales will depend on either rising real incomes, policy changes that raise disposable income, or shifts in consumer behaviour.

For individuals seeking perspective, comparing local and occupational salary percentiles can be illuminating. The analysis accompanying the calculator notes that while six-figure earners are firmly in the top decile of incomes, many still face constrained discretionary budgets once taxes and essentials are accounted for. The government, businesses and analysts continue to monitor the data to gauge the likely path for consumer spending and its implications for the wider economy.