Why inflation headlines don’t tell the full story.
When you hear that UK inflation fell to 3.6% in October 2025, it sounds straightforward. But that figure is just an average based on a standard basket of goods and services. In reality, your personal inflation rate could be higher or lower depending on what you spend your money on.
In this blog, we’ll cover:
- What the official inflation rate means
- Why personal inflation varies by income and lifestyle
- How different households experience inflation
- Steps to calculate your own inflation rate
- What this means for budgeting and planning
What Is Inflation and Why It Matters
Inflation measures how much prices rise over time. The Office for National Statistics (ONS) tracks this through the Consumer Prices Index (CPI), which measures changes in the cost of a “basket” of goods and services. In October 2025, CPI was 3.6%, while CPIH (which includes housing costs) was 3.8%.
Why does this matter? Inflation affects:
- Your purchasing power – how far your money goes
- Savings and investments – inflation reduces real returns
- Wages and pensions – pay often lags behind inflation
Here’s the catch: CPI reflects an average household, but no household is truly average.
Why Headline Inflation Doesn’t Apply to Everyone
The CPI basket assumes typical UK spending patterns. But households differ:
- Families on lower incomes spend more on food, rent, and energy
- Higher earners spend more on travel, leisure, and services
- Retired households have different priorities
When prices rise unevenly, the impact depends on your personal spending mix.
Personal Inflation: How It Works
ONS uses Household Costs Indices (HCI) and CPIH-based rates to show inflation for different groups. These use equal weighting, so each household counts the same.
Key Findings (Apr–Jun 2025):
- Low-income households: 4.1%
- High-income households: 3.8%
- Private renters: 4.5% (highest)
- Homeowners (no mortgage): 3.4% (lowest)
Compare that to the headline CPI of 3.6%. Renters and lower-income families often face higher inflation.
Why the Gap Exists
- Food prices (4.9%) hit lower-income households hardest because they spend more on groceries
- Housing costs – private rents remain high
- Energy bills have dropped, helping everyone, but renters still feel pressure
- Service costs (restaurants, leisure) affect higher earners more
Personal inflation can range from 3.3% to 4.2%, depending on income and housing.
What’s Driving Inflation Up and Down?
Biggest Increases:
- Food and drinks: +4.9% (bread, cereals, dairy lead the rise)
- Restaurants and hotels: +5.2%
- Alcohol and tobacco: Still elevated
Moderate but Persistent:
- Transport services: Airfares and rail remain high
- Recreation and culture: Holidays and leisure add pressure
Lowest or Falling:
- Energy bills: Gas and electricity costs have dropped sharply
- Communication: Mobile and broadband prices stable
- Clothing and footwear: Seasonal discounts keep prices low
Why This Matters for You
If you spend heavily on food and dining, your inflation rate may be higher than 3.6%. If energy bills dominate your budget, recent price drops could mean your rate is lower.
How to Calculate Your Own Inflation Rate
Use the ONS Personal Inflation Calculator
- Enter your spending by category to estimate your 12-month rate.
Check Household Costs Indices
- See benchmarks for renters, families, retirees, etc.
Track your own spending
- Compare last year’s bills to this year’s for key categories.
What It Means for Different Households
- Renters: Likely above average due to rent and food costs.
- Mortgagors: Close to headline rate; watch mortgage interest.
- Homeowners (no mortgage): Usually below average.
- Families with children: Food and childcare push inflation higher.
- Retired households: Depends on healthcare and energy costs.
Headline inflation isn’t one-size-fits-all. While the UK rate is 3.6%, many households experience something different, sometimes much higher. Understanding your personal inflation rate helps you make smarter decisions about spending, saving, and investing.
