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Is £40k A Good Salary In The UK?

Is £40k A Good Salary In The UK feature image

Published on:

Written by: Michael Barton

Published on:

Written by: Michael Barton

Michael has almost quarter of a century’s experience in the financial world. This includes trading and institutional sales trading, and in senior positions to VP of Global Equities, as well as Head of Trader Training, at companies including Merrill Lynch (SNC), Cargill Investor Services, and Goldman Sachs. Michael’s experience also extends to providing financial advice as a personal financial advisor in the UK.
This article has been fact checked by a member of the Wallet Savvy editorial team and complies with our editorial standards.

At face value, it sounds like a lot of money – but is £40k a good salary in the UK? How much will it leave you to spend on the things you love and not what you need? We look at the true value of £40k in the UK right here…

40 grand a year. Sounds like a solid salary, doesn’t it? But is it really that good?

If you’re earning £40k a year, you’re doing pretty well when compared to the average UK worker. In fact, you’re comfortably above the average of around £35k.

Yet, the answer to this question is not as clear-cut as it may seem. A £40k salary may be worth more to you than to others. It depends on so many factors, like lifestyle, housing, and other personal circumstances.

In this article, I look at whether you should consider £40k to be a good salary where you live, what it means after taxes, and how you can make your money stretch further (we could all do with a little more in our pockets, couldn’t we?).

Is £40k Enough? Quick Verdict

£40k sounds a lot, but after tax and National Insurance, and other deductions from your salary, your take-home pay will only be around £2,500 a month: above the national average, but for many, still short of their spending.

Depending upon where you live, housing costs vary greatly. Then there’s the small matter of lighting, heating, food and clothing. Of course, you’ll want to enjoy your life, too – and this all costs, doesn’t it?

Don’t despair! With savvy money management, £40k can provide you with a comfortable lifestyle and the opportunity to build a solid financial base for your future.

£40k Vs Location

When it comes to figuring out if £40k is a good salary, the most important factor is where you live. The UK’s regional economies are as diverse as its landscapes – a hot salary in the Northeast might be considered borderline poverty in the Southeast! (Okay, the north/south divide isn’t quite the chasm it used to be, but it’s still a thing.)

The story takes a different turn if you compare £40k to the average salary in London, which is estimated to be almost £44k.

With the higher cost of living in the capital, £40k doesn’t stretch nearly as far here as it does across the rest of the nation. This doesn’t mean to say you can’t live well on £40k in London, but you will have to cut your cloth accordingly.

Outside of London, £40k stretches much further. Not only is the cost of living lower, but you’ll also be earning much more than regional averages. For example, if you live in the Northeast, where you’ll find the UK’s lowest average salary, a £40k salary is a third higher than the average.

Here’s how average weekly earnings in the UK measure up:

Regional Average Weeky Salaries UK 2024 graph

The long and short of it is that if you’re earning £40k a year, then you’ll be an above-average earner in every UK region except London. It’s a very decent salary. So why is it that so many of us feel like it isn’t?

To answer this question, we have to look beyond where we live.

Tax: £40k Isn’t Really £40k

Thanks to the taxman, what you earn is not what you have in your pocket. Knowing how much will be taken from your gross salary is key to savvy budget planning. Here’s how your after-tax pay breaks down after HMRC has taken its cut.

Wallet Savvy National insurance Card

With a salary of £40k, you’ll pay income tax at the basic rate of 20% of your earnings above your personal tax allowance. This means that, for most people, the first £12,570 of earnings is tax free (though your actual personal tax allowance may be different, depending on your circumstances).

Income tax at 20% on the remaining £27,430 works out at £5,486.

Now, onto National Insurance. These are your contributions that entitle you to certain state benefits, like the State Pension. The rate at which you pay these was cut from 12% to 10% on 6th January 2024, and you pay this on all earnings between £12,570 and £50,270.

If you’re earning £40k a year, you’ll also pay £2,743 in National Insurance.

The net result of these deductions is that your pay after deductions falls to £31,771. Put another way, you’ll be taking home £610.98 per week, not £769.23. That’s one hell of a hit!

Other Deductions: Pensions & More

We may have tackled income tax and national insurance, but we certainly haven’t reached your real take-home pay yet. There are other deductions to consider.

The biggest of these is deductions from your gross salary to pay into a workplace pension (if you’re eligible).

Now, I’ve recently heard many comments about how paying into a pension doesn’t help pay the bills today. This may be true, but a workplace pension is one of the best investments you can make. Here’s why:

  • You get tax relief on your contribution
  • Your employer will also contribute to your pension, often matching your contribution – in some cases, paying in more than you do

Still, whatever you pay into your workplace pension will reduce your take-home pay – but it’s not a loss, it’s an investment in your long-term future.

Other deductions from your salary might include:

  • Student loan repayments
  • Workplace health insurance schemes
  • Company car schemes

I can’t calculate the total effect on your take-home pay. It all depends on what other deductions you have. Suffice to say, though, many of you who are earning £40k per year will take home less than £30k per year (£575 per week).

Living Costs

Even though your gross pay has taken a big hit, £575 a week still sounds a good amount of money. If you’re feeling the pinch on this, it pays to know why. Let’s start off by looking at your living costs.


Your largest single expense is likely to be your rent or mortgage. This is where it really pays to live outside of London!

If you live in the Northeast, the average rent is £657 per month (HomeLet, Dec 2023). That’s around £152 per week, which wouldn’t get you much in London.

As a rule of thumb, you should aim to pay no more than 30% of your net salary on rent, 35% at a push; though the more expensive the area in which you live, the higher the percentage of your salary will go on paying for where you call home.

Utilities & Council Tax

You need heating, lighting, and water. They are non-negotiables. How much these will cost depends on the size of your home, how many people live with you, the steps you’ve taken to be energy efficient, and the area in which you live.

According to British Gas, the average annual bill for electricity, for a three-bedroom house with two/three occupants is £1,041. If you use gas, this is likely to cost another £1,025 a year. Water UK says that average water bills in the UK stand at £448 per year.

As for council tax, this depends upon your property and the area in which you live, but according to the government the average is £1,966.

Food & Clothing

Okay, so you’ve got a home to live in, and light, heat, and water. Next on the list must be food and clothing.

According to the Office for National Statistics (ONS), the average household spends 16% of their budget on food – £4,124 per year, or around £79 per week.

Average spending on clothes and footwear is much less, but still not inconsiderable at £915.20 per year (around £33 per month, per person).


London DLR Commute

How much you spend on transport depends upon how you travel. If you own a car, you’ll need to consider fuel, services, insurance, and tax. This can add up to quite a sum – transport expenditure of £200 per month is common.

This is where those living in big cities like London can certainly save money, by taking advantage of proximity to amenities and public transport.

Discretionary Spending

Now we’ve dealt with the essentials, what about the spending that makes life worth living? This is the money you spend on the things you like doing most.

For me, that’s eating out, travelling, and spending quality time with our children and grandchildren.

Entertainment, Leisure & Travel

The occasional meal out, a drink with friends, a trip to the cinema or local bowling alley – all such things are crucial to keep yourself balanced. How much you spend here depends on your social habits, but we’re looking at between £50 to £150 per week.

Kids at airport

For me, holidays are the highlight of the year. Seeing new places, meeting new people, experiencing new cultures, and trying different foods – wonderful! Whether it’s a weekend break, a week away, or an extended family holiday, travel is a crucial part of most people’s lives.

But have you ever counted the cost of your holidays? According to ABTA, the average spend on holidays is around £2,000 per year per household. (Seems a little low to me – I better speak to Mrs. B about our holiday spending!)

Hobbies & Interests

Do you have a hobby? Do you play for a sports team, play a round of golf each week, get out into nature and walk, run, or paint? Our hobbies and other interests can soon add up to quite a spend.

Depending on your hobbies, it’s likely that you’re spending anything between £50 and £400 per month on doing what you enjoy the most.

Subscriptions & Memberships

Here, we’re talking about (usually) small but regular expenses. Some are so small you don’t even realise the money is coming out of your account.

Get a pen and piece of paper, and write down what you’re spending on things like mobile phones, Sky/Netflix/Amazon, gym memberships, etc.

The average spent on subscriptions in the UK is around £45 per month, but my guess is that you’re spending more than this. Am I right?

Savings and Investments

You should set aside some of your earnings to save and invest. In fact, this is so important that I believe this should really be the first item on your budget – and you should aim to save/invest at least 10% to 20% of your net salary.

That’s between £200 and £400 each month.

Miscellaneous Expenses

In this category comes everything else. Birthday and Christmas gifts are the biggies here, but don’t forget the odd ‘impulse buy’. How much do you spend on these things?

Most households should budget for between £50 and £100 per month here. Hey, I haven’t even mentioned debt repayments…

the Cost of Living

How much do you spend each month? Collating all the above information, here’s a simplified view of average monthly spending:

Expense CategoryAverage Monthly Cost (Rounded)Comments
Housing (Rent/Mortgage)£660Average in the Northeast; higher in regions like London
Utilities (Gas, Electric, Water)£130Based on averages for a three-bedroom house
Council Tax£160Average across the UK
Food£80Weekly household expenditure
Clothing and Footwear£30Average monthly spend per person
Transport£200Car-related expenses or public transport
Entertainment and Leisure£50 – £150Depends on social habits and activities
Holidays and Travel£170Average annual spend per household
Hobbies and Interests£50 – £400Varies greatly based on activity
Subscriptions and Memberships£50Includes mobile, streaming services, gym, etc.
Savings and Investments£200 – £40010-20% of net salary recommended
Miscellaneous Expenses£50 – £100Covers gifts, impulse buys, etc.

And the total? In the region of £1,890 to £2,940! How your spending works out depends upon your personal circumstances, lifestyle choices, and where you live.

But remember, your monthly take-home pay with a salary of £40k is likely to be less than £2,500. Which is why good financial management and an effective budgeting strategy are crucial.

If you don’t have your spending under control, it’s easy to be poor on a salary of £40k!

Charles Dickens’s Mr Micawber once said, “Annual income twenty pounds, annual expenditure nineteen, nineteen, and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”

That’s not quite true today. Now, it’s more like, “Annual income £40,000, annual expenditure £29,500, result misery.”

£40k Is More When You’re Younger

If you are young, single, and on £40k a year, make hay while the sun shines! You’re in the sweet spot, and probably earning much more than most of your peers.

Yes, age is another factor to consider when asking if £40k is a good salary. Here’s how average salaries evolve through different age ranges in the UK:

  • 18-21 years: Median average salary around £20,888
  • 22-29 years: Median average salary approximately £28,413
  • 30-39 years: Median average salary is about £35,526

Earning £40k a year gives you plenty of advantages when you are younger. You’ve got more disposable income to spend on hobbies and holidays. Your potential to save and invest is much greater, and you’ll have more flexibility to explore different career paths.

All this is possible not because you are earning £40k, but because your essential spending is likely to be lower.

Don’t knock living with your parents for a little longer than you might like – it has plenty of benefits. Best of all, if you budget wisely, you’re in the perfect position to build a solid financial base for your future.

11 Tips to Make £40k Feel Like £50k

You’d think that a salary of £40,000 would be enough to have a pretty good life, wouldn’t you? However, it’s not always how much you earn but how you spend your money that’s the deciding factor. Here are my tips to make your money go further:

1. Budget Wisely

You can budget wisely by tracking your spending to reduce those unnecessary expenses. This doesn’t have to be arduous work: using a budget app like Emma can help you regain control of your money and identify where you are overspending.

2. Prioritise Your Expenses

Focus on needs before wants. Do you really need that expensive coffee shop beverage before you start work, or could an instant coffee do the trick?

3. Reduce Your Food Bills

Shop at the cheapest supermarkets in the UK – good-quality produce at much lower prices. You could save around £1,000 a year (or more) by shopping at Lidl instead of Marks & Spencer.

Another tip here is to shop smart – always make a list, and only buy what is on your list.

4. Cook Like a Pro

While we’re talking about food, forget processed foods and pre-cooked meals. Cook from fresh, and make your food go further.

For example, my wife and I can make a £6 chicken stretch to 6 meals each (roast chicken, chicken salad, chicken and leek pies, chicken curries) – all you need to do is add a few veggies and a little love when cooking.

5. Reduce Housing Costs

If you’re renting, don’t be afraid to negotiate price with your landlord, especially if you have proved yourself to be a good tenant who always pays on time.

If you’re young and single and want to fly the nest that is your parents’ home, flat sharing can significantly reduce your living expensing (especially if you live in London).

6. Cut Your Utility Bills

Of course, find ways to reduce your energy and water consumption at home – good for your pocket and for the planet. Switch off lights when you leave a room. Turn down the heating a notch. Take a 4-minute shower instead of a 20-minute bath.

Also, compare costs between providers regularly, and switch to get the best service.

7. Cancel Unnecessary Subscriptions

Last year I cancelled my Amazon subscription. It wasn’t making sense, especially when I can watch so many Amazon series with Freevee.

What subscriptions don’t you need? You’ll be surprised at what you are paying for but don’t use.

8. Walk More!

Get out of your car and off public transport. Walk to the local shops, get fit, and save money.

9.  Socialise More Cheaply

Instead of going out for a meal with friends, why not host a dinner evening? You do the cooking, and they bring the liquid refreshments. Play a few video or board games, watch a cool movie on Freevee. You don’t have to spend big to have a great evening.

10. Avoid Debt

Don’t dip into an overdraft. Avoid loans and expensive credit deals. If you do use a credit card, pay the balance off promptly, every month.

11. Build an Emergency Fund

Budget to save and invest, and focus on building and maintaining an emergency fund first. This will mean you always have a reserve for unexpected expenses, without the need to fall back on credit.

The Bottom Line

A £40k salary can be a solid foundation for a comfortable life, but it all depends on how you manage your money. If you’re savvy with budgeting and spending, you’ll make the most of your income.

It doesn’t matter whether you live in an expensive area like London or enjoy a lower cost of living elsewhere – the principles of good financial management apply. It’s not about how much you earn – it’s about how you utilise your resources to build a solid financial foundation and an enjoyable lifestyle.

With the right approach, your £40k can go much further than it does for the average £40k earner.

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