UK Salary Wage Inflation Calculator | How much should I be paid? (2024)

Inflation is the increase in prices of the everyday things we buy; from food to cars, transport to housing. Unless salaries keep pace with inflation, the amount earned will buy less and less each year. Use our Salary and Wage Inflation Calculator to see how much you should be earning to keep pace with inflation.

Compare my salary to inflation

This page was last updated 20/12/2023.

Introduction.

Welcome to our UK Salary and Wage Inflation Calculator, designed to help you take charge of your financial future. In today's world, your income must keep up as the cost of living continues to rise.

Whatever stage you are at in your career, understanding salary and wage inflation is essential. Our calculator helps you to put a realistic figure on how much your salary should rise this year to maintain the same purchasing power. Is the figure you are being offered a true pay rise or is it actually less than inflation? This calculator gives you the official numbers to work with and helps you negotiate with your employer.

What is inflation and how does it affect my salary?

Inflation is the amount that the cost of goods and services increases by each year. To be able to purchase the same amount of goods or services in the future, your annual salary needs to grow at the same rate as inflation.

If the rate of inflation is more than your salary increase, every pound you earn will buy less. Therefore, you will need to spend an increased percentage of your take-home pay to buy the same goods. This would result in a lower standard of living.

If your salary increases at a higher rate than inflation, every pound you earn will buy more. Therefore, you will need to spend a decreased percentage of your take-home pay to buy the same goods. This would result in a higher standard of living.

What is the history of salary growth and inflation in the UK?

This chart below shows the historical trends of wage growth against the consumer price index (CPI) inflation rate since 2001.

As you can see, wage growth, both total and regular, has fluctuated over the period, with peaks and troughs that correlate to economic cycles, policy changes, or significant economic events. What’s also clear is that inflation, as measured by the CPI, also shows variability, which is expected as it is influenced by factors such as energy prices, currency strength, economic demand, and supply chain dynamics.

Over the last two decades or so, it’s clear that there are periods where wage growth outpaces inflation, which suggests real income growth (where the purchasing power of individuals increases). Conversely, there are also times when inflation outstrips wage growth, indicating a decrease in real income (where the purchasing power of individuals decreases).

Some examples include:

• Early 2000s to late 2000s: There was a long-term trend here where wage growth was higher than inflation, which may reflect the pre-financial crisis economic expansion.

• Post-2008 to Mid-2010s: Following the 2008 downturn, there was a phase where inflation overtakes wage growth, which could relate to the age of austerity.

• The late 2010s to Early 2020s: Wage growth was once again exceeding inflation. This era might reflect a period of relative economic stability and growth before the onset of the COVID-19 pandemic.

• Post-2020: A particularly sharp increase in the CPI inflation rate surpasses wage growth in early 2022 and it has taken 18 months for wage growth to finally catch up.

Examples of salary inflation calculations.

Don’t have time to use the calculator? Here are some quick examples of some common annual salaries to give you an idea of the type of pay rise you will need for your salary to keep pace with inflation.

I currently earn £20,000 each year, what should my salary be next year to keep pace with inflation?

According to the Office for National Statistics, if you have been earning £20,000, you will need a pay-rise of £940 (based on October 2023 CPIH inflation) to make sure that your salary maintains the same level of buying power. This means your new salary should be £20,940 to maintain the same standard of living.

I currently earn £40,000 each year, what should my salary be next year to keep pace with inflation?

According to the Office for National Statistics, if you have been earning £40,000, you will need a pay-rise of £1,880 (based on October 2023 CPIH inflation) to make sure that your salary maintains the same level of buying power. This means your new salary should be £41,880 to maintain the same standard of living.

I currently earn £100,000 each year, what should my salary be next year to keep pace with inflation?

According to the Office for National Statistics, if you have been earning £100,000, you will need a pay-rise of £4,700 (based on October CPIH inflation) to make sure that your salary maintains the same level of buying power. This means your new salary should be £104,700 to maintain the same standard of living.

Don’t forget, this page offers general financial information and should not be taken as personal advice. Remember that investments and pensions can go up and down in value, so you could get back less than you put in.

What should my salary be next year to keep pace with inflation?

Using data from the Office for National Statistics, our interactive calculator allows you to calculate what your salary should be next year, to keep pace with inflation. All you need to do is enter your current salary into the calculator to find out what you should be earning next year to maintain your buying power.

Do you need an Independent Financial Adviser (IFA)?

If you need advice or guidance on your personal or business finances, you can speak to one of our Chartered Financial Planners (IFAs) in Tunbridge Wells. Locally, we serve clients across Kent including Ashford, Maidstone, Sevenoaks and Tonbridge. In East Sussex we have clients in Bexhill, Crowborough, Eastbourne, Hastings, Heathfield and Uckfield. We also serve clients across the UK.

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