Cost of Living in London

Staying in London with local friends allowed us to get a first-hand account of how expensive it is to live in London.

When we were out and about in London today, it dawned upon the two of us that it was not just restaurant food, but also daily groceries and public transporation that were quite expensive in London. For example, we had paid about 5 pounds for an all-day pass in London and about 9 pounds for two bottles of fruit juice and some shredded vegetables and mushrooms.

When I came back to Ajay's place today, I had a conversation with his brother who is an auditor and who is well-conversant with the income tax and cost of living in London. The long and short is: unless you are really making lots of money (for eg. in investment banking), you will save very little money working in London, compared to the same lifestyle say in Singapore.

The tax rate in London is as follows:
Starting rate:
£1 to £2,150 --- 10%
Basic rate:
£2,151 to £33,300 -- 22%
Higher rate:
£33,301 and above --- 40%

Keep in mind a fresh graduate will earn around 17K pounds. Let's say an experienced professional earns $60K pounds annually, he then pays $18,608 pounds (31%) in tax. If he earns $100K pounds annually, he pays $33,747 pounds (33%) in taxes. On top of this, you also need to pay around 12% for National Insurance (which from what I understand, is a right to be part of the pension plan - it isn't something like the CPF in Singapore where individuals contribute to their own account). In all, you spend between 42% - 45% of your salary on taxes and contributions.

On top of this, there is a 17.5% VAT rate which is essentially a sales tax much like the GST in Singapore.

As such, if you make 60,000 pounds a year (ie 5,000 pounds a month), then you end up with about 2,800 pounds a month. Of which, you spend about 100 pounds for public transport (adding an occasional taxi ride), say about 900 pounds for just a simple, shared one-room rental apartment with utilities. That leaves 1,800 pounds.

An decent cooked-in breakfast, lunch and dinner will cost about 25 pounds daily - which makes 750 pounds a month for meals. That leaves about 1,000 pounds on a very strict allowance for other things such as clothes, reading, exercise etc. And this is just catering for one person - much less bringing up a family.

Am glad to be in living in Singapore :)