Is 40K a good salary in the UK?

With the seemingly ever-growing immigrant population, the cost-of-living crisis, and a £12.21 National minimum wage for 21-years-olds and over, now might be the time to ask yourself, is 40K a good salary in the UK?

If you consider that people earning £2,500 to £3,000 gross per month (which equates to a gross salary of around £30k to £36k per annum) are thought to be getting a decent wage, it’s not bad. Those earning a gross salary of £3,300 to £4,000 per month (£39,600 to £48,000 per annum) however, are on a good salary by UK standards.

We always refer to gross salary, meaning income before any deductions such as income tax or National Insurance.

At a glance

• £40,000 is above the UK average salary (£32,736 according to the ONS, 2024) and represents a solid middle-income by national standards.
• Net take-home pay after tax and National Insurance is about £32,319 per year, or £2,693 per month.
• Retirement planning: with £40K gross, maxing out annual ISA (£20K) or pension (£60K) allowances is unrealistic, but consistent investing remains key to long-term wealth growth.

Dual-income households (2 × £40K) fare comfortably across most of the UK, though inflation and housing costs still erode real purchasing power.

Breakdown of £40,000 per annum after tax in the United Kingdom

A gross annual salary of £40,000 in the UK leaves an estimated take-home pay of £32,319.60, or roughly 80% of your gross income after deductions.

Is 40k a good salary in the UK from the income tax point of view?

Under the standard tax code 1257L, this includes:

• Income tax: £5,486 (around 13.7%)
• National Insurance (Class 1): £2,194.40 (around 5.5%)

That brings the total annual deductions to £7,680.40.

Once you pass the £12,570 personal allowance (for tax year 2025/2026), £40K is about as efficient as this income band gets in tax terms — you’re still within the basic-rate bracket, so higher-rate tax does not yet apply.

Figures gotten from UK gov tax service website.

In the March 2024 Spring Budget (reaffirmed in the March 2025 Spring Budget), Jeremy Hunt announced that Class 1 and 4 National Insurance contributions would be decreased to 8%, with effect from the 6th of April 2024.

If you want to know what this means to you, you can search online for a salary calculator for UK wages. Just be a little bit careful. Some are not fully up to date with the latest NI contribution rates. You can, however, rest assured that 40k after tax in the UK is as shown above.

The National Demographic

The cost of living, of course, varies depending on your geographical location in the UK. It’s not surprising that the average salaries and cost of living in London tend to be higher than anywhere else in the UK.

The averagesalarysurvey.com website has a comprehensive breakdown of the average salary in London across a wide range of professions based on gender, age, experience, and occupation.

Interestingly, according to the ONS, the average total earnings across the UK is £682 per week (£2,728 per month/£32,736 per annum). This national average is considerably lower than the 40,000 a year, which is considered to be a good income.

Average UK cost of living statistics

In 2022 the standout-cv.com website put the cost of living for an average key worker here in the UK at £2,005 per month, and £3,073 per month for a household. These cost-of-living figures include rent/mortgage, utilities, food, commuting, clothing, and entertainment.

After living expense deductions, this leaves them with an average disposable income of minus £50 (minus £48.04, according to standoutcv). For these people, the prospects of saving or investing are non-existent.

In 2025, the NimbleFins website puts the average cost for a household significantly higher. The monthly average before paying for a roof over your head is put at £2,873. Add to this 569 per month for renting from a housing association or local authority, or £1,143 per month for renting privately, or £1,292 for paying a mortgage, and the total average comes to £3,442, £4,016, and £4,165 respectively.

Based on the data from Standout-CV, a salary of £40,000 per year is generally considered a comfortable income for an individual in the UK. At this level, most people can meet essential living costs, maintain a reasonable standard of living, and start to think how to invest money by allocating part of their earnings towards savings or investment opportunities.

However, a lot has happened in recent years, what with the aftereffects of COVID, the Russian invasion of Ukraine, and the war between Israel and Hamas resulting in inflation skyrocketing. So the real situation today in terms of a £40k wage and current average costs of living, is not as rosy as it once was.

Median pay by region vs average cost of living per region

The average cost of living in London is £2,200 for a single person and £3,874 for a family of four.

40k a year after tax leaves £32,319.60 which equates to £2,693.30 per month. With the average cost of living for a family of four in London at £3,874 per month, it clearly falls short of the mark. According to NimbleFins, the average cost for a family of four across the UK as a whole is £2,721 per month. In other words, take-home pay from 40,000 doesn’t cover the cost of living, if only one salary is coming in.

Is 40K a year a good salary for your retirement aspirations?

What is a good salary in the UK if you want to retire at 55? Is a 40k salary enough to meet your early retirement goals? The answer seems bleak – even if we are talking about a single-person household. To retire at 55 you need to set aside £2,200 per month or more.

The salary breakdown shown earlier indicates that after taxes and National Insurance if you are on an annual salary of £40K, you’ll be left with £2,693.30 per month. With the average cost of living at £2,005 per month, you will be left with a disposable income of £688.30 per month. It’s well short of the £2,200 needed to retire at 55. But with the right investment strategy, it could still provide a decent income in retirement.

For more information, you should check out this “how much do I need for retirement” blog article.

High and Low-Income Earners in the UK (2025)

In 2025, a £40,000 annual salary remains comfortably above the national average and well clear of low-income thresholds — though it still sits below the level of the UK’s top earners.

Income levels in context

• The average UK salary is around £29,600, with the median just above £33,000.
• The National Living Wage for workers aged 21 and over rose to £12.21 per hour, or roughly £23,800 gross per year for full-time employment.
• A £40K salary places someone within the top 40% of earners nationwide, yielding a net income of about £2,680–2,693 per month after tax and National Insurance.

Who are the UK’s high and low earners?

• High earners typically make over £60,000–£70,000 a year, often working in finance, consulting, engineering, law, IT, and healthcare. They’re concentrated in London and the South East, where salary levels are higher but so are living costs.
• Low earners, by contrast, earn below £23,000–£25,000 and tend to work in hospitality, retail, logistics, arts, and personal care — sectors most prevalent in the North East, Yorkshire, Humber, and non-metropolitan regions.

How £40K fits in

At £40,000, an employee earns roughly 14% above the national average.

• Outside major cities, this supports a comfortable, middle-income lifestyle, allowing for moderate saving or investment potential.
• In London or other high-cost urban areas, it falls below the local average for full-time professionals and may require some compromises in housing or discretionary spending.

Summary table

In short, £40,000 in 2025 remains a good salary by national standards — above the average and offering solid financial stability — but it’s not within the top-earning tier, and its real value varies significantly by region and cost of living.

Top paying jobs in the UK in 2025

If you are fortunate to work for one of the top 20 paying companies published on glassdooor.co.uk, the salaries vary from £85K to £121K per annum. Not only could you afford a more comfortable life, but looking at how to invest £10,000 regularly, or even how to invest £100K every two or three years, would be a definite possibility.

But investing £100K is a lot of money, and it does pose certain problems from a tax point of view. Depending on your investor profile, you might be attracted to maxing out your pension contributions and opening a stocks and shares ISA.

Annual allowances

Putting as much money as possible into a private pension is wise. However, there is an annual cap for the current 2025/2026  tax year of £60k. Pay anything over that amount, and you will not receive the full tax relief on any excess contributions. So, it’s a good idea to check out the tapered tax allowance. Of course, a 40,000 salary after taxes means you can’t get anywhere near the 60k limit.

Your personal ISA allowance is £20K per annum, so is 40K a good salary in the UK from this viewpoint? Well, maximising your ISA allowance would take more than 50% of your gross wage, making getting by on the balance extremely challenging if nigh on impossible. However, suppose you are fortunate enough to have money left over after taking full advantage of your pension and ISA contribution allowances? In that case, you might want to consider other investment accounts, such as a GIA account.

The pros and cons of general investment accounts

Some people might consider general investment accounts (GIAs) as alternatives to pensions. If you are thinking along these lines, here’s what you need to know,

The advantages of GIAs

• Contribute or withdraw as much as you want at any time
• Use your Capital Gains Tax allowance to manage profits
• Take advantage of your tax-free dividend allowance
• You can open more than one GIA
• You can open a GIA in joint names or as a trust

The disadvantages of GIAs

• You might have to pay capital gains tax if you’ve already used your allowance.
• You might have to pay income tax on interest earned or dividends
• There is no tax relief on contributions
• GIAs are accountable for inheritance tax

Putting your money into a private pension is a safer option. However, you can only access 25% of your funds tax-free once you reach age 55. So, while a GIA offers unlimited withdrawals, if you take out too much, your available balance may be inadequate to support the lifestyle you desire in retirement.

Is £40K per person a good salary for a UK couple?

A couple who work full time with a household income of 2 x £40K is in a relatively good position. But of course, circumstances such as geographic location and the cost of living have an important bearing, and with the current inflation rate, it will be even more critical to many.

FAQ