Two mechanisms have attracted considerable attention from re-searchers studying the e¤ects of income on happiness: adaptation and social comparison. In this paper we study both mechanisms using a panel of British households. Besides adding the UK to the countries where adaptation and social comparison e¤ects have been studied, this paper distinguishes itself by analyzing the two mechanisms within a single dataset and testing them both separately and jointly. Our re-sults strongly support the existence of adaptation e¤ects but \u85nd only weak evidence in favour of social comparison.