Did you just land a £55k job or are considering taking one? You might be wondering to yourself “Is £55k a good salary in the UK”. With inflation on the rise and wages being relatively stagnant, it can be hard to know whether or not your earning a good wage.
Let’s take a look at how much you will actually get from the £55k salary, whether it’s good for your age, and how it stacks up against other people in your area.
Quick Overview
£55k is a good salary in the UK. It’s so good, it puts you in the top 12% of earners in the UK. Living outside London on £55k should make for a comfortable life. In London, your £55k won’t stretch as far but it is still £13,134 higher than the average salary for Londoners.
How Does £55k Compare To The Median UK Salary?
The median average salary in the UK for full-time earners is currently £33,280. Earning £55k per year means you’re earning a massive £21,720 more than the average full-time worker. Good job!
Even if you live in London which has the highest average salaries in the UK, you are still earning £13,134 more than the average Londoner. That puts you in a great spot, but those London housing prices are significantly more expensive and will eat into your earnings.
Ultimately, making £55k outside of the capital is considered a great salary by any means. It should be more than enough to support you and your family. Especially if your partner also works full-time. You should be able to commit a significant proportion of your earnings to savings and investing while living an enjoyable life.
What Is £55k After Tax In The UK?
Good work on landing a £55k per year job, however, that doesn’t mean you will be bringing all of that money home. The government wants their cut in the form of Tax and National insurance.
On a £55k salary, you will be just into the Higher Rate tax band. This means you will get your free allowance of £12,570, pay 20% on income up to £50,720, and finally pay 40% tax on the remaining £4,730.
Many people think if you enter into the higher rate you will pay 40% of all of your income. This is not true. You will only pay 40% on any income above the initial £50,270.
You will pay £9,432 in Income Tax and £5,505 in National Insurance.
This leaves you with a net take-home pay of £40,063 per year or £3,339 per month.
If you have student loan payments, they will also get taken out before your pay hits your account.
Is £55k A Good Salary For Your Age?
If we look at the average median salary for full-time workers across all age groups in the UK, we can see that a £55k per year salary is significantly more than the average in all groups.
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 |
If you are earning £55k per year you have likely worked your way up the corporate ladder in a high-income field, such as tech, Law, banking, and many other high-paying jobs. The only people likely to land a £55k per year job in their 20s are people in investment banking and law.
If you’re in your peak earning years and you’re earning £55k this is a good salary and you have likely worked hard to get there. Especially if you are making that kind of money outside of London. If you’re looking to make more, you may find looking for a job in your field elsewhere provides a bigger increase in your salary than a promotion would.
Ultimately, at any age, £55k a year is good money. If you’re in London in your early career, you will likely have plenty of potential to rapidly increase this salary throughout your working career.
Is £55k A Good Salary Where You Live?
Location will also play a significant part in whether or not your salary is good. Living in higher average salary areas usually comes with a higher cost of living. For example, the average salary in the North East is £29,521 whereas the average salary in London is £41,866.
Therefore if you are earning £55k in a lower average salary region in the UK, your £55k is great by comparison.
Someone earning £55k in the North East is going to be able to save and invest much more of their pay each month as their household expenses should be much lower. Regions outside the capital also have much cheaper housing costs allowing you to get a lot more for your money.
If you are earning £55k outside of London you are on a very good salary. You should be able to live a great life, take holidays and save a significant chunk towards your retirement.
Can You Live In London With £55k Per Year?
Yes, you can live in London on a £55k per year salary. This is £13,134 more than the median average salary for Londoners. While this is a great salary, the crazy London rent prices will still eat significantly into your budget.
While average wages in London are around 30% higher compared to the North East, rent prices are around 300% higher. This leaves many Londoners with a lot less disposable income than people living elsewhere in the UK.
You should be comfortable on £55,000 per year in London but it will be hard to save more than the typical 20% of your take-home pay. We recommend living with a roommate to try and cut down on living costs.
Budget Template For £55k Salary
£55k is considerably more than most people in the UK earn. However, that does not mean you can just spend your money recklessly. People who have bad money habits when they are earning little, tend to keep those bad habits even when earning a lot. We want to make sure that is not you.
Using a budget to track your spending is the best way to see exactly where your money is going each month.
On a £55k per year salary, you are bringing home £3,339 per month. I have put together a rough budget template below to help you get started. However, everyone’s financial situation is personal, so you may need to adjust the budget to suit your needs.
We will follow the 50/30/20 rule. This means roughly 50% goes towards needs, 30% to living life, and 20% to savings/investing.
Expense | Budget |
---|---|
Monthly Net Income | £3,339 |
Rent/Mortgage | £1000 |
Utilities | £200 |
Food | £250 |
Transportation | £200 |
Entertainment, Clothing | £1019 |
Saving & Investing | £670 |
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 £55k Salary
In life, housing is most likely going to be one of your biggest expenses. On a £55k salary, you should be able to comfortably buy a house after you have saved up for your deposit.
If you are young I would recommend getting pretty aggressive with your savings to get on the housing ladder. This will likely mean cutting back on holidays and luxuries for a few years but it will be massively worth it in the long run. If you can save £800 a month, you should have a £20k to £30k deposit in 2-3 years.
When renting initially, I wouldn’t go for the biggest and best house you can afford. Realise that your initial housing is temporary and settle for something a little cheaper. This means you can put more into savings and get to purchasing a house earlier.
How Much To Spend On Rent With A £55k Salary
When it comes to renting, the general rule is to spend around 30% of your net take-home income. This means on a £55,000 salary, you should be spending approximately £1000 per month on your rent.
If you’re living in a high-cost-of-living area such as London or the Southeast you may need to stretch this housing budget a little further. You should be able to find a solid house elsewhere in the UK for £1000 per month.
If you can also find a housemate or partner to live with, you will be able to cut your housing expenses in half and save for your own much faster.
Can I Get A Mortgage On A £55k Salary?
£55k in a stable job is enough to qualify for a mortgage. This is more than enough to start thinking about purchasing a house outside of London. If you are buying with a partner you will be able to borrow significantly more than applying solo. The first step is saving up a 5%-10% deposit. I would recommend going for 10% if you can.
In most cases, you will be able to borrow 3.5x -5x your pre-tax income.
On a £55k per year salary, you will be able to borrow approximately £220,000. With interest rates hovering around 6%, this would give you a monthly payment of £1,319 on a 30 Year Mortgage.
This is quite a bit above our recommended budget of £1000 per month. You have to remember purchasing a house comes with other expenses such as insurance, council tax, and maintenance. If I was buying alone I wouldn’t want to be getting a mortgage of any more than £170,000. This would give you a £1,019 monthly payment on the same terms.
If you have a partner who also has a full-time income then a £220,000 mortgage would be much more manageable for your household.
How To Become Financially Free On £55k A Year
If you live outside of London, you should not be struggling to live on a £55,000 per year salary. If you are, you’re making some significant financial mistakes. Here are a few fundamental personal finance rules you should follow to become financially stable.
Create A Budget
Creating a budget is the first step to becoming financially free. Knowing where your money is going each month allows you to be intentional about when you spend money.
You can use the template we provided above to start your budget and customise it to fit your lifestyle.
Get Out Of Debt
If you have any bad debts, your first priority should be paying them off. This might be credit card debt, car payments, personal loans, etc. With high-interest rates, these debts will make you struggle to ever get ahead financially.
Pay off these debts as fast as you can, starting with the highest interest first. Once you wipe out your debt you can start to focus on setting yourself up for financial success.
On £55k per year, you should be able to wipe out most debt quickly. If you have a car that has a £30,000 loan on it and you have no investments or emergency fund, it’s time to sell it and buy something more affordable.
Build An Emergency Fund
Once you cleared your debts, it’s time to start securing your future. An emergency fund allows you to be prepared when things go wrong. If you get laid off at work, your car breaks down you don’t have to stress. This money is specifically there to fix these problems.
You should aim to save 6 months of essential expenses. This is housing, food, and essential bills. For someone on a £55k salary, this is likely around £1800 per month. You should aim to save £10,800 in an emergency fund.
Keep this money in a high-interest savings account and only touch it for ACTUAL emergencies. Even if you lost your job you have plenty of time to find a new one, without having to stress out too much.
Start Investing
Once you have an emergency fund and have wiped out any bad debts, it’s time to start investing. You may already invest some money in a pension each month through a workplace pension scheme. If they offer a match, you should be maxing this out first.
You have a couple of options for investing. If you are planning to invest for retirement and don’t ever plan on touching the money until then, I would recommend investing in a SIPP (Self Invested Personal Pension) due to the tax relief benefits and government bonus.
I personally try to max out my stocks and shares ISA first as I like to have access to the money at any time, in case an opportunity comes up, such as buying rental property or investing back into my own business.
Either way, setting up one of these investment vehicles and investing in simple index funds is one the most popular ways to start investing.
Final Thoughts
£55k is a great salary for most people in the UK. Based on your Pre-tax income you are in the top 12% of earners. That’s a great salary but don’t let it stop you from going after more. If you live in London £55k should comfortably cover your living expenses and give you the opportunity to rapidly increase your income.
This salary is more than enough to support a family while also saving for retirement. If you also have a partner, you should be able to live a very comfortable lifestyle.
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