Inflation in the UK has been above the Bank of England’s target of 2% since September 2024 and there are fears that the Iran war could push up the cost of living in the UK, but how much this affects you depends on what you spend your money on.
The Consumer Price Index increased by 3% in January 2026, down from 3.4% in the year to December 2025, according to the Office for National Statistics (ONS).
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But since everyone has different shopping habits, your rate of inflation may differ from the national rate of inflation – if you don’t drive, rising petrol prices may not directly affect you. Similarly, rising oil prices due to supply concerns in the Gulf region could also mean higher energy bills for many people. This can especially affect those who use heating oil to heat their homes.
What is the inflation rate?
In simple terms, inflation is a measure of how much the prices of goods and services in the economy have changed over a long period of time, usually a year.
The ONS measures inflation by buying the same “basket of goods” each month from different retailers across the country and finding the average price the basket is worth in the UK.
The basket of goods includes things like eggs, flour, energy costs, nursing home costs, VR headsets, vinyl records and much more. The basket is updated every year to ensure it accurately reflects what customers are shopping for.
The ONS then compares the price of the basket in one month with its price in the previous year, expressing the change as a percentage. This is the inflation rate.
Your inflation rate is a measure of how much the goods and services you use have changed over time, excluding increases in the prices of things you don’t spend your money on.
Your inflation rate can be very different from the overall level of inflation in the economy, and calculating it can be a good way to find out how inflation is really affecting you.
How do I calculate my inflation rate?
You can calculate your inflation rate in the same way as the ONS calculates the headline inflation rate.
You should read your receipts and bank statements to find out the types of things you buy regularly, then create your own basket of goods and services, writing down the price of these.
Once you have your shopping basket, you can check its price each month when you go shopping.
If you compare this to your expenses for the same month last year (and your spending habits were about the same), the difference between the two numbers will give you a rough idea of how much prices have gone up or down.
You should make sure that you remove any data that may damage your data. For example, you should remove the expensive ones immediately and make sure that you buy the same brands in the same supermarket or store.
You must also account for monthly lifestyle changes as well. For example, if you hosted a dinner party one month but often cook for yourself in the same month a year later, these expenses will likely skew your food consumption figures and make them incomparable.
If you don’t want to do the math yourself, it may be easier to use the inflation calculator provided by the ONS. This asks you a series of questions, such as:
- What is your housing situation (for example, paying off the mortgage or renting)?
- What is your household income?
- How much does your family spend on food and drink?
- How much do you spend on electricity bills?
The app is interactive, so once you enter your information, it will automatically calculate your inflation rate.
Knowing the inflation rate is not just an idle curiosity. Noticing the areas where your budget has a big increase can help you make adjustments, where necessary.
Finding that your monthly grocery bill has risen by £50 compared to last year could be just the motivation you need to switch to a cheaper supermarket.
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