What is disposable income?

This study video looks at a key macroeconomic indicator - the level of household disposable income.

Disposable income is the amount of money that individuals and families have available for spending or saving after they have paid their direct taxes and received any state welfare benefits.

Direct taxes include income tax, national insurance and (local) council tax.

Stages in calculating disposable income:

Original income before government intervention

+ Cash benefits (e.g. state pension)

- Direct taxes and local taxes (e.g. council tax)

= Disposable income