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A Closer Look at the Average Household Budget

The ongoing cost of living crisis has left everyone cutting down on spending to the absolute minimum. When it comes to household expenditure, UK residents spend the largest chunks of their budget on housing costs, transport, utilities, food and drink.

Different people have different circumstances, so depending on where you live, your general financial situation and stage of life, you may also be spending extra money on healthcare, college tuition or childcare.

Household budget

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Average household expenditure UK

The cost of living is causing problems for UK residents right across the board, according to data from the Office for National Statistics’ Living Costs and Food Survey.

The average UK household spends around £9,800 per year on utility bills, telephone, broadband and television services, home insurance and council tax.

In addition, the average monthly rent in Britain is £493 for social renters and £973 for private renters. The average cost of mortgage payments per month is a whopping £1,485, with some householders having seen a £500 a month increase this year alone as interest rates continue to rise.

Many people are spending 55% of their income on their mortgage alone now, while those who own their home outright are spending only 2% of their budget on housing costs. Tenants today spend on average 36% of their income on rent.

The average household budget UK-wide is around £32,655 a year, although some people earn much less or much more than this, based on personal circumstances.

Food and drink

Householders are spending only 12% of their income on food and non-alcoholic beverages, totalling £78 per week based on two adults sharing the costs. Food is a necessity, of course, but the ONS points out it is a variable category when it comes to expenditure.

While one low-income family might dine on cheap pasta and a touch of homemade Bolognese sauce, another high earner could go out to a London restaurant and spend £100 on one meal alone.

To compile the data, the ONS looked at the poorest households’ budgets and found they were eating as cheaply as possible. Those with a disposable income of less than £11,000 per year eat at home more often. They spend 84% of their total food and drink budget on dining at home and very rarely go out for a meal.

However, the top 10% highest-earners in the UK spend around 32% of their food budget on dining out and cook less at home.

Transport costs

The second highest cost for the average UK household is transport, taking up 13% of people’s total budget. The average household spends more than £5,000 a year to get around. This has increased by 11% since 2021.

The average household spends around £3,500 annually on the running costs of one car. The highest amount of our income is spent on running personal vehicles, with petrol and diesel alone costing each household an average of £1,500 a year.

Car insurance costs a further £629 annually. The cost of maintenance such as regular services and repairs has also increased.

People are buying used cars much more than they used to. The average Brit spends almost twice as much as they did before the pandemic on second-hand vehicles, as the price of new cars has steadily increased, putting them out of many motorists’ reach.

The average cost of public transport is £112 a month, which is spent mainly on train, bus and tube fares.

Utility bills

The average cost of utility bills is £2,065 per year. However, this can vary greatly, depending on the size of your home, the number of people living there and the appliances in use.

Based on a couple who are out at work during the day, the average monthly electricity bill in the UK is £96, while the monthly gas bill is £111. Energy bills increased by a hefty 54% in April 2022 and then went up again by 27% in October 2022.

The average UK energy bill in 2020 was only £1,287 per year. The cost of energy to a five-bedroom home is more than double the cost to a home with one to two bedrooms.

Surviving the cost of living crisis

When it comes to coping with the cost of living, UK residents are increasingly having to turn to loans to make ends meet.

In February 2023, 22% of adults in Britain – equating to around 11.5 million people – admitted to borrowing money and relying on credit just to pay their bills.

According to data from the ONS, 49% of households were in arrears with utilities payments. This was an increase from 17% for the same period in 2022. At the beginning of 2023, 40% of adults surveyed said they didn’t expect to be able to save any money at all this year.

Inflation is falling more slowly than expected, according to experts from the Resolution Foundation. They believe the cost of living crisis may start to ease in 2024, but it won’t end until wages catch up with price increases. The Resolution Foundation estimates this is unlikely to happen until 2027.