We’re living in very uncertain financial times. Prices for everything seem to be going up and down like yo-yos, making it difficult to know what kind of salary we should strive for and what salaries we can actually live off! Is £40k a good salary in the UK, for example?
£40,000 is considered a good salary in the UK at the time of writing, as it’s more than the measured average per person and also above the UK median.
However, there’s a few ways of looking at this question and the factors that come into play along the way! Let’s take a closer look at the current salary situation in the UK and what might be considered a comfortable wage.
How much is £40k after tax?
When earning £40k as an individual, your take-home salary after paying income taxes and national insurance is around £31,000 per year, which is equivalent to roughly £2,600 per month.
The table below outlines the big line items in relation to the typical taxes and deductions.
What is considered to be a good salary in the UK?
As ‘good’ is a fairly subjective term, there is no one universal figure that would be applicable for all. It is important to have some context, so let’s look at a couple of statistics first:
- At the time of publication, the average salary across the UK is £36,768 while the median is £27,696 before income tax.
- The cost of living per UK household at the time of writing sits at around £3,000+ per month, which totals to £36,000+ per year, and that’s to be considered after you already paid income taxes, i.e. from your net income!
- The cost of living for a single person varies between £2,100 to £3,000 per month, depending on where you live. This works out to £25,000 to £36,000 per year.
If we’re talking statistically, then yes, £40k is considered to be a good salary in the UK as its higher than both the national mean and median income levels. However there are three other factors to consider if you’re looking to fully answer that question – what is your profession, where do you work, and what is your expense level?
Let’s take a deeper look.
It’s important to consider the context in which profession these salaries are for. A good salary for a doctor, would be different than a good salary for an engineer, and much different than a good salary for a sales clerk!
If you’re looking for more comparison points, head over to my in-depth discussion about median salaries in the UK. I look at median salaries by age, region, and occupation. This should help you get an even better sense of how well your salary compares to your different peer groups.
Location is important because it is a direct driver of expenses for the people living there. It therefore also sets a level of expectation on what the corresponding salaries should be.
A location with a higher cost of living – say London – will have typically also have higher wages for the same type of jobs compared to regions with a lower cost of living.
For example, a salary of £40k in London isn’t the same as a salary of £40k in the North of England. Given the increased cost of living and services close to the capital, £40k is likely to travel shorter than it might in, for example, Sheffield or Leeds.
It’s why one of the first things people consider when measuring salary value is to look how far they intend to live away from London.
The next set of related factors to consider is the size of your household, how many breadwinners there are, and what lifestyle you live. The answer to these questions feed in to the larger question: what is the cost of living for you and your family?
On a broader scale, statisticians calculate the UK’s cost of living on a handful of different factors. They consider how much people spend on mortgage and rent, debt, the cost of food and groceries, clothing, travel, energy and utilities, cars, and any entertainment costs.
Of course, it’s difficult to measure these factors on averages when we all have different demands, needs, and lifestyles! Let’s dig a little more in to that further below.
Is £40k enough to live on?
The slightly frustrating answer to this question is, as always, ‘it depends’. While it is more than sufficient for a single person, you may find it to be lacking if your household has more than 2 people.
As outlined above, a salary of £40k works out to just over £31k after taxes. Based on the fact that a typical household has around £36k in expenses after taxes, it’s clear that a household income of £40k will not be enough.
Just one person earning £40k will not be able to cover the bills. You will need multiple income earners so that your after tax income, i.e. your net income, exceeds £36k.
Let’s put these numbers together then: For a 4-person household that has two income earners and has minimum annual expenses of around £36,000, a good household income would be anywhere north of £60,000 in total.
It’s great because it means that both partners don’t necessarily need to earn £40k each. One person with a salary of £40k per year and the other with a salary of close to £30k per year will collectively hit that £60k annual household income figure.
A total household gross income of at least £60,000 to £70,000 puts you in a great position to cover your expenses, save some money for a rainy day and retirement, and have a little left over for some leisure expenses!
For a single person, the story is different. A salary or household income of £40k is more than enough to live on.
Here are a few factors that can influence whether or not £40k is enough to live on.
Do you have any dependents?
This is simple maths – the more people you have to support, the more money you’ll need. £40k for a single person is likely to offer fairly comfortable living. However, in a single-income household with multiple children and/or pets, you will find it’s a stretch.
Where do you live?
I don’t just mean location, but the type of home you occupy, too.
Housing prices closer to London are infamously higher than those you’d pay for further north, too. It’s not just commuting costs and congestion charges you have to keep in mind! Living in a ‘cheaper’ area of the UK could however help you to reduce your bills.
Of course, your individual circumstances will dictate how far this money travels.
What taxes do you pay?
When earning £40k as an individual, you’ll be subject to various taxes before you can take any money home. At the least, you’ll need to pay 20% income tax.
Beyond this, a wage of £40k will typically push you into the threshold for Class 4 National Insurance if you are self-employed. These payments towards your state pension are higher than what you’d expect to pay on a profit of £11,000+.
Of course don’t forget that you will also have other non-income based taxes to consider – such as council tax – based on whether you own property or not.
Are you carrying any debt?
Aside from a mortgage on your home, do you have any debt? As interest rates rise, carrying consumer debt is like having to pay a constantly increasing tax. Interest rates on credit card debt or car loans can quickly pinch!
Student loan payments must also be considered. A wage of £40k is also likely to see payments made to student loans companies if you have a university debt to pay off. While many people expect to clear their debts by the time they retire, in many cases, you’ll start paying money back off tuition fees and loans when you breach a specific threshold.
At the time of writing, £40k is enough to start paying back student loans. You’ll either see these payments coming off your monthly wage slips, or you’ll need to account for them in your tax returns.
Where is £40k a good wage in the UK?
Let’s come back to the idea of location changing the value of money. Statistics show that the average wage in London as of the time of writing is almost £52,600. In the North East, it’s much lower, at £30,100.
Therefore, £40k is a below-average wage in London, but you’re earning 25% more than most people if you live in areas such as Newcastle, Sunderland, or Middlesbrough. In fact, if you earn more than £34,000, you’re above average compared to the rest of the UK outside of London.
Living in some of the cheapest areas in the UK will help your wages go much further as the cost of living in those areas tends to be much lower.
Are wages in the UK shrinking?
Sadly, as a result of skyrocketing inflation, wages in the UK appear to be shrinking – mainly because they are not rising at the same rate as inflation.
Statistics from mid-2023 show that inflation rose to a rate of 7.9%. UK wages, meanwhile, were growing at a rate of 6.9%.
The only way this will change is if inflation continues to shrink, or if wages rise to compete. At the time of publication, the trends have finally started moving in the right direction, but there’s no clear indication when parity will finally be reached!
To get around these challenges, some people are pursuing extremely frugal living by attempting to live under £1k per month!
How Do I Make My £40,000 Go Further?
It’s not easy to make ends meet these days and even though a salary of £40k is higher than the average salary, it might still feel like it’s tough to make ends meet. We’ve covered a number of different topics to help you save money and make it go further. Here are a few quick wins that might help you make an immediate impact:
- Save money on your grocery shopping bill.
- Pursue a frugal lifestyle by trying out a few of money saving tips.
- Reduce costs on your television bill by consider cheaper alternatives to Sky TV, Virgin, and BT.
- Try some cashback apps or join Nectar and make a little money on your normal spending.
- Try out some ideas to make an extra 100 quid online each week to help free some extra cash!
If you really want to take a leap, you can also try to reduce your rental costs or mortgage expenses by sharing your home with roommates or flatmates, or by moving to a cheaper location.
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Before You Go…
Whether £40k is a good salary in the UK depends on various factors, as we have seen. However, no matter how much one earns, it is crucial to plan for the long term to ensure financial stability and security. Investing wisely can help grow one’s net worth and provide a safety net for unexpected events.
By investing in stocks, bonds, or real estate, individuals can generate passive income and secure their financial future. Compound interest can turn small investments into significant wealth over time, making it an essential tool for those looking to grow their net worth.
Our whole blog is dedicated to help you get on the path of financial freedom. Feel free to browse around and read through the articles. There are plenty of investment books and podcasts that you can use as a learning resource along the way to help you reach your goal faster.
And remember, there’s no faster way to increasing your wealth than increasing your income. If you’re ready to think about the next level, do read our article on whether a salary £50k in the UK is a good salary or not.
What is a middle class income in the UK?
Based on current projections, a salary considered ‘middle class’ would start at £40,000 for an individual earner. Therefore, a £40k salary, as it’s £7k above the average, would make you part of the middle class.
Where is now the cheapest place in the UK to live?
£40k will likely go far in areas such as Bradford, Durham, Aberdeen, Sunderland and Middlesbrough. Take a look at our guide to the cheapest places to live in the UK for a further breakdown on why this is the case.
Is 40k a good salary in Scotland?
Yes, £40k is a good salary in Scotland. For context, the median salary in Scotland is approximately £27,600, so you’re well above the median.
40k a year is how much an hour?
An annual salary of £40k is equal to £20.51 per hour. Please see our yearly salary to hourly wage calculator for additional details.
40000 a year is how much an hour?
A salary of £40,000 per year is equal to an hourly wage of £20.51. Our yearly salary to hourly wage calculator can provide more information.
by Jon Craig
I am the creator of Project Financially Free and I started this journey to both educate myself and share my insights on personal finance. I’m passionate about financial literacy and I invite you to join me on this transformative path. See more.