Affordable London


You are probably aware that London often hits the top five on the list of Most Expensive Places To Live Ever. These lists often focus on housing costs, which are of course huge in London. This we know.

What about the other stuff?

If you take a minute to look, some things are actually less expensive. Some big ticket items, even.

Some things to consider when looking at cost of living in London:

First let’s get a baseline.  The US Bureau Of Labor Statistics, which sounds very official but we have never met them, conducts a survey to examine where the average American spends their paycheck. The last survey as of this writing was 2012. Lots of information in the survey, but here’s some key numbers:

Category US Total Annual Expense
Housing $16,887
Transportation $8,998
Personal Insurance and Pensions $5,591
Food At home $3,921
All Other Expenditures $3,557
Health Care $3,556
Food Away From Home $2,678
Entertainment $2,605
Cash Contributions $1,913
Apparel and Services $1,736
Total Expenses $51,442

So how does living in London compare?

The largest expense – housing – will be magnified in your London flat.  A bunch. For a respectable place in a respectable location, you can plan to pay $2,100 per month for rent.  This includes Council Tax (more on that later). This price will often include utilities as well.  So the $16,887 above becomes $25,200.

So, yes, the cost of housing is much higher in London.

However, the second place American expense of transportation is much less in London. No need for a car, or car payment, car insurance, gas, or maintenance when you are on the Underground.  All told, the average cost of transportation will be reduced about $500 per month in London, or $6,000 per year.  This starts to offset the higher price of London housing.

And health care? Setting aside the “our-health-care-can-beat-up-your-health-care” debate for just a second, let’s looks at costs of care in the US versus London.

Health care in the UK is free. That’s right, free. Another huge savings to offset the cost of housing. The UK system is known as the National Health Service (NHS) and is paid for by taxes. Health care in the US costs the average individual $3,556 per year.

Now, back to the “who’s better” health care debate, because it needs to be mentioned before you move to London.

The UK’s NHS gets lots of criticism for high wait times, long waiting lists, and various mishaps. Plenty of press available on that.  On the other hand, the World Health Organization (WHO) ranks the UK NHS system at 18th best in the world.  The WHO looks at things like life expectancy, infant mortality, and surgical mishaps.  The same organization ranks the US health care system at 37th.   So, who really knows who has the better deal?

Note that you can buy private health insurance in the UK if you like. The average premium for an individual is $2,754 (2014 rates). Still less expensive than the US option, and again, it is not required.

So, stacking up just the categories of housing, transportation, and health care, London is less expensive than the US.  London is about $1,600 less per year, again, just looking at these three categories.

So what else is there to spend money on?

Well, that would be groceries (food at home), clothing, services, dining (food away from home), and entertainment.   All of these cost more in London. There are plenty of studies, web sites, price-of-a-gallon-of-milk comparisons out there, and they all tell the same story.  London costs more.  The difference in these categories, in fact, makes London a more expensive place to live overall, according to our study.

Category US Total Annual Expense UK Total Annual Expense
Housing $16,887 $25,200
Transportation $8,998 $2,616
Personal Insurance and Pensions $5,591 $5,591
Food At home $3,921 $4,901
All Other Expenditures $3,557 $5,336
Health Care $3,556 $0
Food Away From Home $2,678 $4,553
Entertainment $2,605 $4,168
Cash Contributions $1,913 $1,913
Apparel and Services $1,736 $2,778
Total Expenses $51,442 $57,055

We’ve taken the worst case scenario costs (i.e. the biggest numbers from internet cost of living comparisons) in these areas above.

Of course, everyone has different spending habits. Some go out for dinner nine nights out of seven, others eat every meal at home. Some need the latest fashions.  Each person will need to do their own assessment here. This study is based on averages.

You’ll notice that the higher cost of living in London depends mostly on areas where disposable income is spent.   You completely control your spending in these areas. Apparel cost can vary widely – do you want new Nike’s or something less flashy? Is your meal out going to be at the greatest steak place in your postcode, or the local pub? Do you go to the theater or watch movies at home? You control these expenses.

So, is it really more expensive to live in London?  The answer will be “yes”, but the difference may be much smaller than you think.  Take a look for yourself and your situation.  Maybe check it out for a few months during a sabbatical.

Finally, as you do your own income vs cost comparison, here’s some last things to keep in mind:

Income Tax: While US folks often gripe about income taxes, those same folks would grab their US taxes back out of the global pile. Using a round income of $70,000 US dollars, the income tax rate in the US would be 25%. That same level of income in the UK would be taxed at 40%.

Of course, lots of factors go into this – single vs married, child deductions, and etc. Each person will need to do an individual comparison. Where your income comes from (i.e. which country) will make a difference when you live in London.

Value Added Tax or VAT: If you have traveled to London, you probably saw something about VAT refunds at the airport. If your flight didn’t take off in 17 minutes, you might have looked into it a bit closer. Here’s how VAT works if live in London.

The VAT is 20% on most goods and services. That’s bad news. However, the good news is that the VAT is already included in the price tag of an item.  This is good news if you were adding 20% to your cost estimates, thinking you needed to account for the mysterious VAT. It’s not like US sales tax, where your $100 pair of shoes ends up costing $109 or so because of sales tax.

VAT applied to most goods and services, but does not apply to food, children’s clothes, and a few other ‘zero rated’ goods.

Council Tax: London residents also pay something known as a Council Tax. This tax varies depending on the value of the property in which you live. The Council Tax covers things like schools (the biggest piece), garbage collection, roads, transportation, policemen, firefighters, streetlights, and more. At 2014 rates, the Council tax averaged about $170 per month in London. This is not far off from what many people pay for property tax in the US.

Council Tax is similar to property tax in the US. The twist is that renters in the UK have to pay the Council Tax too, not just property owners.  US property tax, and UK Council Tax are including in the housing costs in our study.

Also check out:

US Bureau of Labor Statistics report:

For the free e-book “Ten Ways You’ll Do Better In London”, see

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