Budgeting basics
About 8 minutes
Income vs spending
A budget compares money coming in (wages, allowance, gifts) with money going out. If spending is higher than income, the gap has to come from savings or borrowing.
Needs, wants and savings
A common starting point is the 50/30/20 split: around 50% on needs (travel, phone, food), 30% on wants, and 20% saved. It's a guide, not a rule — adjust it to your situation.
Gross vs net pay
Gross pay is what you earn before deductions. Net (take-home) pay is what lands in your account after Income Tax and National Insurance. Most people can earn up to the £12,570 Personal Allowance each year before paying Income Tax.
Lifestyle creep
When income rises, spending often rises with it without anyone noticing. Deciding in advance how much of a pay rise to save is one of the simplest ways to grow wealth.
Check your understanding
Figures used (version 2026.1)
UK tax year 2026/27 · last reviewed 2026-09-29. Simplified for learning — not financial advice.
- Income Tax Personal Allowance
- £12,570 a year
- Negative credit marks stay on file
- 6 years
- Budget guide used
- 50/30/20 (needs/wants/savings)
- Currency
- GBP (£)