Ever wondered, ‘What is a Good Salary in London?’

As one of the world’s most expensive cities, understanding what constitutes a good income here is essential.

In this article, I’ll dive into the numbers and factors to consider, ensuring you’re well-informed about living comfortably in the UK’s bustling capital.

Having worked in the retail investment sector in London over the last four years, my experience may help you gain insight into determining your target income in one of the world’s greatest cities.

So, in a nutshell, what is a good salary in London? A good salary in London ranges from £50,000 to £60,000 per year considering its higher cost of living. This allows for a comfortable lifestyle, especially given the city’s housing and transportation expenses.

What Is a Good Salary in London?

In London, a “good” salary is typically higher due to the city’s cost of living and the many high-paying jobs available.

For a single person without kids, £50,000 might be a comfortable income, allowing for rent in a one-bedroom flat and some savings.

But to buy a property, extra funds or a partner’s income are usually needed. Couples without children should aim for a combined income of £80,000-£100,000, ideally with each partner earning £40,000-£50,000.

Families with two kids need around £120,000-£150,000 for a stable lifestyle, covering childcare and bigger housing. Earning more can provide luxury benefits, but there’s a limit to the added value.

To find the right salary for you in London, consider your desired lifestyle, and any dependents, and compare them to average earnings.

Median & Average Salary in London

When evaluating typical salaries in London, looking at both the median and the average provides helpful benchmarks.

The median salary is the midpoint of all salaries – with half of people earning more and half earning less. For London, the median salary is currently around £41,866 annually¹.

Find more statistics at Statista

In contrast, the average salary is calculated by adding up all salaries and dividing by the number of people.

The average salary in London is approximately £37,000 annually, approximately £2,377 per month after tax and national insurance².

Earning above the London median salary suggests a decent, middle-of-the-road pay level for the city. However, surpassing the London average salary indicates you likely have an excellent income by local standards.

The specific borough within London also impacts the median and average salaries:

• The highest median salaries are found in Wandsworth (£42,804 annually) and Westminster (£41,136 annually).
• The highest average salaries are in Kensington, Chelsea, Hammersmith and Fulham (£107,556) and Westminster (£105,948).

This demonstrates the wide range of incomes throughout the various areas of London.

Central, affluent neighbourhoods unsurprisingly have the highest wages.

Salaries in London also tend to correlate strongly with age, rising to a peak in middle age:

• 18-24 years old: Median £20,580, Average £22,860
• 25-34 years old: Median £37,008, Average £49,584
• 35-49 years old: Median £38,568, Average £64,020
• 50-64 years old: Median £32,388, Average £58,560
• 65+ years old: Median £22,356, Average £37,164

Occupation and years of experience further influence salaries significantly. Roles in high-paying fields like finance, law, and technology generally exceed the London-wide averages.

Comparing your earnings to the median and average London salaries for your age cohort and borough provides helpful context on where you stand.

Factors That Affect Your Salary in London

Several factors can impact salaries in London, England:

1. Industry: Sectors like finance, law, and technology typically offer higher salaries compared to others.
2. Experience: As you gain more experience in your field, your earning potential generally increases.
3. Education: Higher qualifications or specialised training can lead to better-paying roles.
4. Location within London: Central London roles might pay more due to higher living costs and the location’s prestige.
5. Company Size: Larger firms or multinational corporations might offer higher salaries than smaller companies or startups.
6. Job Role and Responsibilities: Senior or managerial roles tend to have higher salaries than entry-level positions.
7. Supply and Demand: High-demand roles with fewer qualified candidates can command higher salaries.
8. Negotiation Skills: Your ability to negotiate can play a significant role in your final salary package.
9. Economic Climate: Wider economic factors and the state of the job market can influence salaries.
10. Benefits and Perks: Some roles may offer a lower base salary but provide significant additional benefits like bonuses, healthcare, or stock options.

It’s essential to consider these factors when evaluating or negotiating a salary in London.

What Does It Cost to Live in London?

The cost of living in London is exceptionally high compared to most other places in the UK. Carefully estimating expenses is crucial when determining your target salary.

Some key costs include:

Housing

Housing is the biggest monthly expense in London. A one-bedroom apartment in an average area costs around £1,500 per month for rent, plus council tax and utilities.

Renting a two or three-bedroom unit suitable for a family can easily exceed £2,500+ per month.

You can use the London rents map to enter your postcode to find median monthly rents.

The image below was updated on 31 July 2023 and contained data for the year, April 2022 to March 2023.

Buying a home is even more expensive, with the average property price surpassing £542,300 in London³. This results in high mortgage payments in addition to other ownership costs.

Saving for a down payment while paying high rent poses an obstacle for many.

Overall, be prepared to spend 30-50% or more of your take-home salary on housing.

Transportation

Living further from central London makes transportation more expensive. Monthly public transit passes cost between £100 and £200 based on zones. If you drive, you’ll face parking fees, congestion charges, and fuel and maintenance costs.

Owning a car costs £200-£600+ monthly. Be prepared to spend at least £200-£400 per month per adult on transportation.

Food and Groceries

Grocery bills in London run around 30% higher than the UK average⁴. Single adults might budget £300-£400 per month on basic food expenses.

Families require £800-£1,200+ to feed multiple members. Eating out adds further dining costs.

Fun fact (well, not fun for thirsty Londoners): “While a London pint cost around 19% more than the UK average at the end of 2019, the latest figure now in 2023 stands at just under 29%.”⁵

Childcare

In one of the most expensive cities globally for childcare, expect to pay £1,000-£1,500+ per month for a full-time nursery spot per child.

Live-in nannies average over £2,000 per month.

Private schooling comes in at £15,000-£25,000+ annually per child.

Discretionary Spending

London offers many social activities, events, and attractions that can increase discretionary spending.

While flexible, typical costs for dining out, nightlife, memberships, hobbies, travel, and shopping can easily exceed £1,000 monthly.

Miscellaneous

Other common monthly costs include mobile phone bills (£30-£50+), clothing (£100-£200+), personal care, medical expenses, pet care and more.

These variable expenses often total over £500 per person.

Taxes

Income, property, and council taxes consume a significant percentage of London salaries.

Effective tax rates approach or exceed 30% for many workers. Reducing tax obligations should be part of managing costs.

Realistically, average monthly budgets range from £2,500-£3,500 for a single person to £6,000+ for a family with children.

London’s high costs demand strategic budgeting and spending discipline.

Here’s a good video that further discusses London living costs:

How to Make Your Salary Go Further in London?

Making your salary go further in London involves a mix of budgeting, savvy spending, and taking advantage of the city’s resources.

Here are some tips:

1. Budgeting and Tracking: Regularly track your spending and set a budget. Use budgeting apps or spreadsheets to monitor your finances.
2. Accommodation: Consider sharing a flat or renting a room instead of an entire apartment. Look for places in zones 3-6 where rents can be cheaper.
3. Transport: Utilise monthly or annual Oyster cards for savings on public transport. Consider cycling or walking to save on commute costs.
4. Groceries: Shop at local markets or discount supermarkets. Buying in bulk or during sales can also help save.
5. Entertainment: Look for free events, attractions, or festivals happening in the city. Use discount sites for tickets and dining.
6. Dining: Eat out during lunchtime specials or use apps that offer discounts. Cook at home more frequently.
7. Utilities: Reduce energy costs by using energy-efficient appliances and turning off lights and electronics when not in use.
8. Shopping: Opt for second-hand or charity shops for unique finds at a fraction of the price.
9. Networking: Connect with local groups or communities that share money-saving tips and deals.
10. Saving and Investing: Regularly set aside a portion of your salary for savings. Look into investment opportunities to grow your wealth.

You can maximise the value of your salary in London by integrating these strategies and staying mindful of spending,

Final Thoughts

In London, a good salary often ranges from £50,000 to £60,000 per year due to high living costs, especially for housing and transport.

While this amount suits many for a comfortable life, individual needs and goals can vary.

It’s essential to weigh your expenses against your financial targets, like saving or managing debt, to determine if a salary meets your needs.

Balancing your income with spending helps ensure financial stability in the city.

FAQs

You may also like:

• What is the average salary in the UK?

Sources:

1. https://www.statista.com/statistics/416139/full-time-annual-salary-in-the-uk-by-region/ ↩︎
2. https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/annualsurveyofhoursandearnings/2022 ↩︎
3. https://www.dailymail.co.uk/property/article-11652853/House-prices-London-highest-country-inflation-drops-lowest-UK.html ↩︎
4. https://data.london.gov.uk/blog/the-rising-cost-of-living-and-its-effects-on-londoners/ ↩︎
5. https://data.london.gov.uk/blog/how-is-inflation-affecting-people-in-london/ ↩︎