British households have £176 less to spend each month than they did a year ago, according to data from comparison website MoneySuperMarket, as the rising costs of energy and food continue to erode household finances. After accounting for bills, housing costs and other essential spending, the average person has £725.15 remaining each month, down from £900.91 in October 2025. The squeeze reflects a broader pattern where everyday costs driven by inflation and the conflict in Iran are consuming larger portions of household budgets, whilst incomes have stagnated in real terms.
The financial pressure has been compounded by decisions made in this week's Budget. Chancellor John Healey left income tax thresholds frozen, meaning the point at which people start paying tax has remained at £12,570 since 2021. This decision pushes more Britons into paying income tax or into higher tax bands as their earnings rise. Whilst wages rose by 3.7 per cent on average over the past year, this barely exceeds inflation at 3.5 per cent, meaning household incomes have seen virtually no real-terms growth.
MoneySuperMarket's survey of 8,000 adults found that average monthly spending across household bills and everyday expenses reached £1,477.85, with 67 per cent of income now consumed by these costs compared to 65 per cent a year earlier. Reported monthly income after tax fell to £2,203.00 from £2,558.58 in October 2025, a drop of £355.58. In response, households are cutting back on discretionary spending such as subscriptions, streaming services and gym memberships. Between July and October 2026 alone, monthly outgoings rose by £23.31 whilst income after tax increased by just £2.50, leaving people £20.81 worse off.
The squeeze varies significantly by location. Norwich emerged as the hardest-hit city, where people typically had just £428.43 left after essential costs, the lowest of any city measured, with bills consuming 77 per cent of reported income. By contrast, London residents had the highest surplus at £898.90 monthly, reflecting higher incomes that offset the capital's elevated outgoings of £1,703.60. The Centre for Economics and Business Research, which produces the Asda Income Tracker, found particular pressure on lower and middle-income households. Those in the lowest income quintile saw weekly disposable income fall by 5.1 per cent, meaning they now spend £76 more per week than they have.
Looking ahead, the outlook remains bleak. The Institute for Fiscal Studies warned that households faced a 'depressing' outlook, with this decade set to be the worst for household income growth on record. The Resolution Foundation, a think-tank, projects that typical working-age households will see disposable income fall by £1,050, or 3 per cent, between now and 2029. Sam Miley, head of forecasting at Cebr, cautioned that whilst household incomes rose 3.8 per cent in the past year, spending power in real terms increased by just 2.4 per cent, with pressure on finances set to persist from higher energy price caps and elevated fuel costs.
For UK savers and borrowers, the combination of frozen tax thresholds, stagnant real wage growth and rising essential costs means household finances will continue to deteriorate, with limited relief expected before 2029.