There is no doubt that the cost of living has increased rapidly over the past few years. If you’re currently making £20k or are considering a job that has a £20k salary, you may be wondering whether or not it’s a good salary.
£20k is definitely on the lower end of average salaries in the UK. You may start on £20k if you are just out of school or university. Let’s take a look at how far £20k will stretch in the UK and how you can get the most out of this salary.
A £20k salary is £13,280 lower than the Median Average salary of £33,280 for full-time workers. Overall, £20k is on the lower end of income in the UK and is slightly below what a minimum wage worker would be paid if they worked 40 hours a week, 52 weeks a year. Living anywhere on a £20k salary is going to require some diligent budgeting.
Median Salary In The UK
The Median average salary in the UK is £33,280 for full-time workers. If you are earning £20k you are a below-average earner.
If you are young and just entering the workforce, this shouldn’t be discouraging. £20k is a starting point and there is plenty of time to increase your salary over your career.
If you have been in a job for a number of years and see no potential for an increase in salary, you might want to consider your options. There are plenty of career options out there that will provide more than £20k per year without much training.
If you want to make more money, it could be a good idea to take a look at the options available to you.
Is £20k A Good Salary For Your Age
When starting out in your career, you’re likely to start on a lower salary around the £20,000 mark. 40 to 49 is on average the highest earning years in a person’s career. By working your way up the ladder you can expect to get promoted to higher positions in a company and earn more money.
Let’s take a look at the median average salaries in the UK by age as of 2023.
|Age||Median Average Yearly|
As you can see a £20,000 salary is slightly lower than the average of £20,888 for people aged 18 to 21. If you are earning £20k you are in the bottom 50% of earners for people aged 18 to 21.
If you are 22-29 you may be just coming out of University and starting on £20,000. If that’s the case you have time to grow your salary closer to the average of £28,413 for this age range. However, if your in your mid to late 20s and are still on £20k per year, it may be time to look elsewhere for a job with more opportunity.
If you are in the 30+ age range and are working full-time for £20,000 per year, this is not a good position to be in. By simply putting your time in at any job you should have been able to work your way up to a salary closer to the median average in the UK. If your working a dead-end job, it could be a good idea to start looking elsewhere for jobs that pay more.
Is £20k A Good Salary Where You Live?
£20k anywhere in the UK is going to be a tight salary to live on. If you live in a major city such as London or Manchester, it will be pretty much impossible to live on this salary.
In cheaper cost-of-living areas such as Northern Ireland or the West Midlands, you might be able to get by on £20k per year if you can find some cheap housing or house share with someone else.
What Is £20k After Tax In The UK?
If you earn a gross salary of £20k in the UK, you won’t be bringing all of that home. You receive a net amount each month after tax and national insurance contributions.
On a £20,000 salary, you will be in the 20% tax bracket. We also get a tax-free allowance of £12,570 per year so you will only be paying tax on the remaining £7,430.
This means you will pay £1,486 in tax and £891.60 in National Insurance.
Your net take-home pay after tax and National Insurance payments is £17,622.40 per year or £1,468.54 per month.
Budget Template For £20k Salary
If you are earning £20,000 per year, it’s important to know exactly where your money is going each month. Creating a budget will allow you to stick to a plan each month and ensure that you don’t end up spending more than you make.
If you want to save and invest for your future, you will likely have to make some sacrifices to ensure you can consistently put money away each month. Even if you can only invest £50 or £100 each month it starts to add up and reap the benefits of compound interest.
If you are earning £1,468 per month after tax, here is a rough budget template you can follow to get you started. Here we will follow the 50/30/20 rule. This means 50% goes to needs, 30% to living life and 20% to savings.
|Monthly Net Income||£1,468|
|Entertainment, Clothing & Transportation||£453|
If you live with a partner who is also working full-time and earning the same or more than you, you could live comfortably on this salary. It becomes harder if you are single and living alone. Your best bet is to get a roommate to split your rent and utility bills with.
If you want to get into more detail with your own personal budget, check out the easy monthly budget spreadsheet we have created.
Housing On A £20k Salary
In life, housing is going to be one of your biggest expenses. On a £20k salary you will want to ensure that you are not stretching yourself too far when it comes to renting or getting a mortgage.
Speaking from personal experience, it is better to live in a smaller house with extremely affordable rent or mortgage than to overextend yourself. The freedom you get from having cheap bills is worth a lot more than an extra room in your house that never gets used.
Let’s take a look at how much you should be spending on housing on a £20,000 salary.
How Much To Spend On Rent On A £20k Salary
When it comes to renting, you ideally want to spend less than 30% of your net take-home income. This means that on a £20,000 salary, you should be spending approximately £440 on your rent.
Over the past couple of years we have saw rising rent prices combined with stagnant wages meaning rent is eating further into people’s budget. Depending on where you live, you might have no choice but to pay more than £440 per month.
You should aim to keep your rent between £500 and £700 per month. Anything more than £700 will leave you squeezed for cash in other areas such as bills, entertainment, and investing.
If you are still young, finding a roommate or multiple roommates is a great way to decrease your rent costs. Splitting rent with a partner is also a good way to lower your rent.
How To Make £20k Go Further
It can be tough living on a £20,000 salary but there are some great ways to ensure you aren’t spending more than you have to.
Stay At Home
If you are currently in your early 20s I would recommend staying at home with your parents for a few years to save as much of your salary as possible. If this is an option for you, you can rapidly save towards a deposit for a house rather than spending that money on rent.
I stubbornly moved out of my parent’s house and started paying £800/month in rent at 21. Had I stayed at home for another 3 years I could have saved almost £30,000 and that’s not including utilities and food which likely would have been cheaper at home.
That’s a significant chunk of money that could be used to put a deposit on your first house.
Audit Your Finances
It’s crazy how many people just avoid looking at their finances. At a minimum, you should be auditing your bank accounts every quarter but ideally once a month.
- Look for any recurring subscriptions that can be canceled
- Analyse your spending to see if you have any bad spending habits (eating out too much etc)
- Can your savings be moved to a higher-interest savings account?
- Can you get a cheaper price on bills such as electric, insurance, TV subscriptions etc
Cook For Yourself
Eating out is getting more and more expensive by the day. Packing a lunch each day and cooking a homemade meal at night is a much cheaper option. Not to mention it’s much healthier.
“I don’t know how to cook” is not an excuse. Anyone can search for some easy recipes on Youtube and put a good meal together. Not to mention they will be much healthier than eating takeout.
Keep Savings In A High-Interest Savings Account
Now that interest rates are rising, savings interest rates in banks are also rising. Ensure you are shopping the market and getting the highest return on your money.
How To Make More Than £20k
If you want to make more than £20k there are a few options to consider:
- Continue to work hard and climb the corporate ladder if your job has room for growth
- Be on the lookout for higher-paying jobs in your area of expertise
- Get a second job at night and on the weekend (This can be a good option if you are looking to get rid of bad debt quickly)
- Start an online side hustle that allows you to make some extra income (This could eventually become a full-time business)
- Acquire a new skill that will allow you to get a higher-paying job
£20k is a fairly low salary in the UK. It’s slightly below minimum wage for someone working a 40-hour week. However, if you are just coming out of school or university you may end up starting on a salary of around £20,000. If you’re just getting started, £20k is fine but you would want to ensure you have a good career path ahead of you where salary increases are frequent.
Check out other salaries: