With UK Inflation rates peaking in 2023, money isn’t going as far as it used to. If you’re currently making £25k or are considering taking a job with a £25k salary, you may be wondering whether or not it’s a good salary.
The answer will depend on your current financial situation, where you live, and whether or not you have dependents. Let’s take a look at how far £25k will stretch in the UK and how you can get the most out of this salary.
Quick Overview
A £25k salary is £8,280 lower than the Median Average salary of £33,280 for full-time workers. Overall, £25k is on the lower end of income in the UK however if you have no dependents and live in a lower-cost-of-living part of the country it can go quite far. This salary will not stretch very far in higher cost-of-living areas such as London or Manchester.
Median Salary In The UK
The Median average salary in the UK is £33,280 for full-time workers. If you are earning £25k you are a below-average earner.
If you are young and just entering the workforce, this shouldn’t be discouraging. £25k is a great starting salary 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. If you’re happy living on £25k per year that’s fine.
However, if you want to make more money you might consider a career change or find a new job with more upside opportunity.
Is £25k A Good Salary For Your Age
When starting your career your salary is likely to be lower than when you end your career. 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 |
|---|---|
| 18-21 | £20,888 |
| 22-29 | £28,413 |
| 30-39 | £35,526 |
| 40-49 | £37,825 |
| 50-59 | £35,402 |
| 60+ | £31,340 |
As you can see, the median average salary is over £25,000 for anyone over the age of 22. If you are earning £25k per year you are in the bottom 50% of earners for all age brackets except 18-21.
If you are 22-29 you are close to the median at £25,000. You are likely a couple of promotions or job moves away from reaching the median average income for your age group. You may also be in the earlier years of this age range giving you time to catch up to the median.
For the 30+ age bracket, you are behind your peers significantly at this point in your career. You may benefit from learning a high-income skill to increase your job opportunities or even starting a side hustle to make up the difference.
This data does include higher paying locations such as London and other major cities, so if you are slightly behind but live in a lower-cost-of-living area you likely have a similar quality of life.
Is £25k A Good Salary Where You Live?
If you are living in a major city such as London £25k won’t go very far. The median average salary in London is £41,866 whereas the median average salary in the North East is £29,521.
£25,000 will go a lot further in cheaper cost-of-living areas such as the West Midlands or Northern Ireland. In these locations’ £25k is much closer to the median average salary.
What Is £25k After Tax In The UK?
If you earn a gross salary of £25k in the UK, you won’t be bringing all that home. You will receive a net amount each month after tax and national insurance contributions.
On a £25,000 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 £12,430.
This means you will pay £2,486 in tax and £1,492 in National Insurance.
Your net take-home pay after tax and national insurance payments is £21,022 per year or £1,752 per month.
Budget Template For £25k Salary
On a £25,000 salary, knowing where your money is going is important. Creating a budget will allow you to stick to a plan each month and ensure you aren’t spending more than you are earning.
If you want to save and invest you will likely have to make some sacrifices to ensure you can consistently put money away each month. Even if you can only save £50 or £100 each month it starts to add up and reap the benefits of compound interest.
If you are earning £1,752 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.
| Expense | Budget |
|---|---|
| Monthly Net Income | £1,752 |
| Rent/Mortgage | £550 |
| Utilities | £150 |
| Food | £200 |
| Entertainment, Clothing & Transportation | £500 |
| Saving | £350 |
Depending on where you live, you may need to extend how much you spend on rent. Ideally on a £25k salary you split rent with one or more people to save on living costs. This will help you save more money and potentially buy your own house at a much earlier time.
Personally, as I am trying to retire early I would cut down on the entertainment budget and allocate more money to saving and investing. This will allow you to reach your financial goals much earlier. You will also reap massive benefits from compound interest in your 20s.
If you want to get into more detail with your own personal budget, I would recommend checking out our Monthly Budgeting Google sheet.
- Monthly Budget Overview
- Custom Categories
- Transaction Log
- View Daily Spending Overview
- Track Needs, Wants, Savings/Investments & Debts
Housing On A £25k Salary
In life, housing is usually one of the biggest expenses you will have. On a £25k salary, you will want to ensure you aren’t 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 £25,000 salary.
How Much To Spend On Rent On A £25k 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 £25,000 salary, you should be spending approximately £525 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 £525 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 Much To Spend On A Mortgage On A £25k Salary
When getting a mortgage you can expect to borrow anywhere from 3.5 – 5x your annual salary before tax.
If you have managed to save up enough money for a deposit you may be wondering how much house you can actually afford.
On £25k/year salary you can likely get a mortgage of around £100,000. With interest rates currently around 6% this would give you a monthly payment of £600 per month on a 30-year mortgage.
This falls fairly close to our 30% rule however if interest rates continue to rise, you may find yourself having to pay an extra £100-200 per month eating significantly into your budget.
Ensure that you allow room in your budget for interest rates to rise even more in the future.
If you’re buying a house with a partner and you both earn £25k per year, buying a house in this range becomes much more comfortable.
Even though you could buy more house with a partner I would recommend purchasing a house you can comfortably afford and have more money left over for investments.
You can always purchase a bigger house further down the line if you feel like you need one.
How To Make £25k Go Further
It can be hard living on a £25,000 salary but if you make some smart choices it becomes much more manageable.
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 which 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 take out.
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 £25k
If you want to make more than £25k 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
Final Thoughts
Ultimately £25k is a good starting salary in the UK. From here you can start working your way up the career ladder and increasing your yearly income. If your income is capped with no future opportunity for growth you might consider starting a side hustle or finding a job with more opportunity.
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