Disposable Income
For budgeting, disposable income is the money left after paying tax, National Insurance and your essential fixed living costs, such as rent or mortgage, council tax and utilities.
What it means
For budgeting, disposable income is the money left after paying tax, National Insurance and your essential fixed living costs, such as rent or mortgage, council tax and utilities. This is the money you can choose how to use, whether that's saving, investing or discretionary spending.
You earn £2,800 a month. After tax, and other basic fixed costs like rent you have £1,500 left over. This is your disposable income.
Why it matters
Knowing your disposable income helps you understand how much money you actually have available each month.
Disposable income is different from 'leftover money' because you still need to pay for other expenses from it.
Is disposable income the same as take-home pay?
No. Take-home pay is your income after tax. Disposable income is what remains after both tax and your essential fixed living costs have been paid.