Most UK households have the same major categories of expenses, which provide a roof over our heads, food in our bellies, clothes on our backs, and transport to and from work or school. We've analyzed data from the latest 2016 Living Costs and Food Survey from the Office of National Statistics (ONS) in order to better understand average spending levels across these major categories. Depending on where you live, your stage of life, and your financial circumstances, you may also be spending extra on childcare, college tuition, or healthcare.
Average Household Budget in the UK
The average after-tax income in the UK, by household, was $32,692 in 2014, according to the ONS. Here’s how the average household budget breaks down:
|Expenditure Category||Weekly Household Spend||Annual Household Spend||% of Budget|
|Housing (e.g., rent, mortgage interest payments, repairs, etc.)||59.30||3,084||11%|
|Food and non-alcoholic drinks||56.80||2,954||11%|
|Recreation and culture (e.g., pets, gym fees, TV, etc.)||45.90||2,387||9%|
|Restaurants and hotels||45.10||2,345||9%|
|Household (e.g., furniture, linens, appliances, etc.)||35.50||1,846||7%|
|Utilities (e.g., water, gas, electric, etc.)||32.20||1,674||6%|
|Clothing and footwear||23.50||1,222||4%|
|Personal (e.g., toiletries, jewellery, sunglasses, etc.)||14.80||770||3%|
|Money transfers and credit (e.g., cash gifts)||13.00||676||2%|
|Vices (e.g., alcohol, tobacco, etc.)||11.40||593||2%|
|Licences, fines and transfers (including road tax)||3.40||177||1%|
|Total Weekly Spending||£529.00||£27,508||100%|
Average Cost of Housing
The average UK household spends £10,025 per year on all things related to housing. That’s an average of £4,070 for direct payments on rent or mortgage interest, council taxes, and insurance. The remaining £5,955 covers utilities and other household operational and maintenance expenses and equipment. A full breakdown of average housing expenses is illustrated in the following chart.
About 36% of UK households are mortgage-paying homeowners. These homeowners pay an average of £9,360 per year (just over £180 per week) on mortgage interest, council taxes, and other expenses such as maintenance, home improvements, utilities, and homeowners insurance. The average mortgage payment also includes an additional amount each month (average of £4,160 per year) that goes towards the principal, effectively turning cash earnings into home equity.
Average net rent in the UK is £92 per week. Those who rent pay just a touch less than homeowners each year for their rent, council taxes, utilities, and renters insurance, an average of £10,310. This figure encompasses a wide range of rents from small towns all the way up to London, and reflects housing benefits and rebates.
|Rent or Buy?||Average Annual Costs|
|Average annual cost to rent||£10,310|
|Average annual homeowners costs (including mortgage interest payments, not capital repayment)||£9,360|
This side-by-side comparison reveals that renters do indeed pay more than homeowners in non-recoupable expenses each year. Keep in mind that homeowners do also pay over £1,200 per year in home improvements (e.g., new bathroom fixtures or kitchen cabinets). These costs are considered capital improvement - that is, they may increase the value of the underlying asset, the house. As a result we don't include these amounts in our side-by-side comparison. If we had, then the out-of-pocket annual costs are nearly the same for rent vs. buy. As a financial decision, buying a home might only pay off if its underlying market value appreciates significantly over time.
Total costs for a regular roof over your head, whether rented or owned, typically eat up around 35% of an average UK household’s income. While the largest component of housing costs is rent or mortgage interest, a close second is the cost of utilities. Gas & Electric are by far our largest utility expense. Recent increases in the marketplace have led to a government push to encourage consumers to [switch energy suppliers](energy switching), in an effort to keep costs down.
Average UK Transportation Costs
The second largest cost for the average UK household, behind housing, is transport. We spend an average of £4,254 per year to get around - this is more than the average household spends on rent/mortgage interest payments a year. The largest component of our travel budget is operating our personal vehicles. We spend just over £1,000 a year on petrol & diesel per household, and the average cost of car insurance is £473 per year. The used car market is hot - we spend nearly twice as much money on used cars than we do on new! Those taking public transport spend £317 on average on bus, train, and tube rides. Finally, holidays - the average household spends another £388 on airfares, mostly heading out of the UK.
Average UK Food Costs
The third largest segment of our budgets is food. The average UK household spends £2,954 a year on food and non-alcoholic drinks. Another £406 is spent on alcohol, mostly wine. Food and drink therefore consume 12.2% of our total annual budgets.
While food is, of course, a necessity for life, it’s often considered a fungible category in a household budget. After all, a family could dine on spaghetti with a touch of homemade bolognese, for a low cost meal. Or we could go out to a London hot spot and drop hundreds of pounds on dinner every night.
To gauge a basic minimum for food costs, we can look at the budgets of our poorest households, who are presumably eating as cheaply as they can. Those earning less than £10,000 per year still spend about £2,000 annually on food (and another £286 on alcohol). They eat at home more often, nearly 80% of the time, but have meals out the remaining 20% of the time. Other households, those earning more than £63,000 per year, spend £9,250 on food, dining out 50% of the time. For more details, see our article on Average Annual UK Food Spending.
One notable change in expenditures is the decrease in alcohol and tobacco spending. For the first time in recent history, household spending on these vices has dropped below £12 a week, as you can see in the following chart. Not only are we saving money but we are getting healthier!