The Best Budget Categories for UK Households

Why Budget Categories Matter

A budget category is simply a label for a type of spending — for example, “rent”, “transport”, or “food shopping”. Grouping your expenses helps you:

• See where your money actually goes

• Spot areas to cut back when prices rise or your income dips

• Set better savings goals and track progress

• Plan for irregular costs like car insurance or holidays

Without clear budget categories, your spending can quickly blur together, making it hard to see patterns or make improvements.

Step 1: Start With the Essentials – Your Core Living Costs

Every household budget begins with the non-negotiables — the costs required to keep a roof over your head and the lights on.

Essential categories include:

1. Housing – Rent or mortgage payments, service charges, ground rent, and council tax.

2. Utilities – Gas, electricity, water, and your TV licence. Consider monitoring prices and comparing suppliers through trusted resources like Ofgem’s energy comparison advice.

3. Insurance – Home and contents insurance, life insurance, and any required cover for your property.

4. Food and Groceries – Everything you spend at supermarkets or local food shops. Track this weekly to avoid underestimating.

5. Transport – Car finance, fuel, insurance, MOT, or public transport costs such as Oyster cards, rail fares, or bus passes.

These are your “must-pay” costs. Once these are covered, you can allocate funds to other areas with flexibility — but this is where every budget should begin.

Step 2: Add Everyday Living Expenses

Once essentials are sorted, look at day-to-day living costs — the things that make life easier, enjoyable, or more convenient.

Common UK household categories include:

• Clothing and Footwear – Everyday wear, school uniforms, workwear, and repairs.

• Health and Wellbeing – Dentist visits, prescriptions, optician costs, gym memberships, or wellness apps.

• Childcare and Education – Nursery fees, school clubs, packed lunches, books, and uniform top-ups.

• Mobile, Internet, and Subscriptions – Broadband, mobile contracts, streaming services (e.g. Netflix or Spotify), and cloud storage.

• Personal Care – Toiletries, haircuts, or grooming appointments.

• Entertainment and Socialising – Meals out, cinema trips, birthdays, and holidays.

It helps to separate “needs” from “wants” in these categories, so you can quickly adjust spending when money is tight.

Step 3: Plan for Savings and Financial Goals

A strong budget doesn’t just track spending — it builds your future. Include categories for:

• Emergency Fund – A savings buffer for unexpected expenses, ideally holding 3–6 months of essential costs.

• Short-Term Savings – For things like holidays, Christmas, or annual insurance renewals.

• Long-Term Savings & Investments – ISAs, pensions, or investment accounts.

• Debt Repayment – Credit cards, overdrafts, or personal loans. Always prioritise high-interest debt first.

If you’re unsure how much to save, start small — even £50 a month can grow over time. See our main budgeting guide for strategies to balance saving and spending.

Step 4: Don’t Forget the Irregular Expenses

Some costs don’t appear every month, but they’re still predictable. Forgetting them can wreck your budget when they arrive.

Create a category for annual or occasional costs, such as:

• Car servicing and breakdown cover

• Gifts and birthdays

• Home maintenance and repairs

• Holidays or weekend trips

• Professional fees or memberships (e.g. union fees or professional registrations)

A tip: spread these costs across 12 months in your budget so you’re never caught out. For example, a £600 annual car insurance payment equals £50 per month to set aside.

Step 5: Track and Review Regularly

Once your categories are set, track your spending against them. You can do this manually, through your online banking app, or by using our Next Steps Budget Template — which automatically organises your expenses into sensible categories so you can see where adjustments are needed.

Every month:

1. Review what you actually spent versus what you planned.

2. Note any one-off expenses and decide if they’ll repeat.

3. Adjust your categories if needed — budgets are meant to evolve, not stay static.

Example: A Household Budget Breakdown

Below is an example of a typical UK household’s monthly budget percentages. Yours might differ, but it helps to know what’s realistic:

• Housing: 25–35%

• Utilities & Bills: 10–15%

• Food & Groceries: 10–15%

• Transport: 10–15%

• Savings & Debt Repayment: 10–20%

• Leisure, Clothing, and Other: 10–15%

These ranges reflect average spending in the UK but always tailor to your income, region, and family size.

Taking Your Budget Further

Once you’ve organised your categories, you can take the next step by:

• Automating payments for bills and savings to avoid missed deadlines.

• Using separate accounts (for spending, bills, and savings) to make tracking easier.

• Reviewing energy or service contracts annually to secure better rates.

• Checking credit score and financial products regularly using trusted tools like MoneyHelper.

Final Thoughts

The best budget categories for UK households are the ones that make sense for you — simple, clear, and tailored to how you live. Start with essential costs, add regular spending, include savings goals, and don’t forget the once-a-year expenses that often slip through the cracks.

By keeping your categories organised and reviewing them monthly, you’ll not only understand where your money is going but also make consistent progress towards your financial goals.

And if you’re ready to put this into practice, download our Next Steps Budget Template to start building your personalised budget today.

Your next step: set up your categories, track your spending, and take control of your finances — one budget line at a time.