Real Life on £25k: What Do Junior Wages Get You?

Ever wondered what life looks like on a £25,000 salary?

Ever wondered what life looks like on a £25,000 salary? Let's break it down. After taxes, bills, and essentials, what's left for the low-wage earner? Dive into the realities of budgeting, saving for a home, and the challenges of living on a junior wage in today's economy. 

  

Income and Taxes 

When someone earns £25,000 in 2024/25, they take home £20,273. This means £1,689 in their pocket each month. This assumes a student loan on Plan 2 and the standard 5% pension contribution. Over the year, they'll pay £2,234 in income tax and £1,243 in national insurance. 

  

How does this stack up against real life expenses?  

  

Rent and Bills 

According to HomeLet, the average rental cost in the UK (Excluding London) was £1,059 in January 2024. To keep things fair, let's look at the average cost for a double room in a 3-bedroom houseshare, which SpareRoom puts at £647, excluding London. 

  

Bills are sometimes included, but generally house-sharers split the cost of gas, electric, water, and council tax. 

  

British Gas estimates the average monthly cost of gas and electric for a 3-bedroom house at £167.39. Ofwat places the average water bill across all households at £473 per month. The most common council tax band in the UK is A. This makes the most common average payment £1,391.87 annually.  

  

So, split over 12 months and shared between two other housemates, the monthly "essentials" bill sits at £252.12.  

  

Now, once your bills are paid, you need to eat and get places! 

  

Food and Travel 

According to SkintDad, the average person in the UK spends £62.20 each week on food. That's around £270 a month.  

  

Travel outside of London is really hard to quantify. This is a fork in the road - if you drive, your costs will be vastly different to a public transport user's... and their costs depend on location, age, requirement to travel, and any concessions they may receive. But as 75% of the UK population holds a full drivers license, we've chosen to focus on drivers.  

  

GoCompare found that the median cost of a car insurance policy between October and December 2023 was £465. Average road tax costs £180 per year.  

  

Using the average commute distance of 19.5 miles for a single occupancy car journey, the average current UK fuel price of £1.398 per litre, and the average car consumption of 40 miles-per-gallon, this equates to a round trip cost of £6.29 per day. For a person commuting 3 days a week, this adds up to £75.48 a month. Rounding this up to £150 gives us flexibility to include shopping and weekend driving.  

  

So, where are we at?  

  

Total Expenses 

In: 1,689 SALARY 

  

Out:  

  

647 RENT 

252.12 BILLS 

270 FOOD 

38.75 CAR INSURANCE   

15 ROAD TAX 

150 FUEL  

  

= £1,372.87 total expenses  

  

What does this leave your average 25k worker with? A whopping £316.13 a month.  

  

This doesn't take into account other essential expenses, such as mobile (average is £38 a month according to Ofcom) or Broadband (average is £26.90 a month, which shared between 3 becomes £8.96 a month).  

  

Assuming you pay for your mobile and broadband, this leaves our £25k a year earner with £269.17 a month, or £8.85 a day.  

  

Not a lot of wiggle room there.  

  

Savings and Homeownership 

Now let's say our £25k earner is looking to purchase their first home. Better.co.uk's median property value figure in January 2024 for first-time buyers is £260,000. They also found that the median first-time buyer deposit in January of this year was £30,000. This gives us an 8.67% average deposit value.  

  

Assuming our £25k earner never goes out, never goes over budget, pays the same rent, shares with the same number of housemates,  pays the same in bills for five years, house prices stay the same, interest rates don't change, and they manage to  save £100 a month at an average 3.25% interest rate...  

  

Our 25k earner will be able to achieve their £30,000 deposit in only... 18 years 4 months! The grand sum of £30,004 would be saved by June 2042. 

  

Is £25,000 a year a real living wage? 

Gone are the days where £25,000 a year is a living wage. The average UK worker works 35.9 hours a week. On 25k, minus tax, national insurance, and pension contributions, this works out at around £7 an hour. Well below the Real Living Wage of £12 an hour suggested by the Living Wage Foundation.  

  

In 2001, the median starter salary for graduates was £18,000 a year. Adjusted for inflation, this would be £32,163 today.  

  

So, there you have it - life on a £25,000 salary for an average individual earner. Maybe it's time for that compensation review...  

 ____ 

Sources:  

  

https://www.thesalarycalculator.co.uk/salary.php 

https://homelet.co.uk/ 

https://www.spareroom.co.uk/content/info-landlords/average-rent-uk/ 

https://www.britishgas.co.uk/energy/guides/average-bill.html 

https://www.gov.uk/guidance/understand-how-council-tax-bands-are-assessed#council-tax-bands-in-england-based-on-1-april-1991-values 

https://www.quittance.co.uk/conveyancing/advice/buying-a-property/council-tax-bands-table-of-all-uk-regions-compared 

https://skintdad.co.uk/average-weekly-food-shop/ 

https://www.gocompare.com/car-insurance/guide/how-much-does-car-insurance-cost/ 

https://www.theaa.com/driving-advice/driving-costs/fuel-prices 

https://fuelcostcalculator.uk/#:~:text=Our%20calculator%20uses%20a%20very,%C3%B7%20vehicle%20MPG%20x%204.546

https://www.gov.uk/government/statistical-data-sets/nts02-driving-licence-holders 

https://www.zoopla.co.uk/discover/property-news/average-rent-uk/ 

https://better.co.uk/mortgages/house-deposit 

https://www.livingwage.org.uk/what-real-living-wage 

  

  

 

 

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