Four million people across England and Wales are living in households stuck in a negative budget, spending more on essential living costs than they earn, Citizens Advice has warned.
The charity said the situation is worsening as food, energy, and housing bills continue to rise, pushing millions further into financial distress. In addition to those already in the red, a further 580,000 people are at risk of falling into crisis, with less than £50 left at the end of the month.
Citizens Advice reported that individuals servicing existing debts are falling further behind, as the cost of everyday necessities continues to outstrip household incomes. Its findings are based on analysis of Office for National Statistics (ONS) spending data, as well as information from its own clients.
Private renters and single parents were identified as the groups most vulnerable to financial hardship.
Yvonne Parks, a debt team manager at Citizens Advice South Gloucestershire, said that the number of clients in negative budgets has grown dramatically. “I have been a specialist debt adviser now for 30 years and, although there have always been clients with negative budgets, these were the exception. Now we are seeing around half of all debt clients stuck in the red.”
She shared the example of a nurse struggling to make ends meet despite working overtime, noting that rent consumes over half of her take-home pay — a situation increasingly common among working households.
According to Citizens Advice, the average household deficit for those in a negative budget was £343 in 2024–25, but this is expected to rise to £396 in 2025–26. More than half of those the charity supports with debt advice now live in negative budgets, with average household debt reaching £9,963.
Rising living costs have compounded the issue. Energy bills for a typical household have climbed to an annual equivalent of £1,755 for dual fuel, while food inflation has edged higher once again. Figures for August showed food prices rising by 5.1% year-on-year, driven by sharp increases in the cost of butter, coffee, chocolate, and beef. Official data also shows rents consuming an ever-larger share of tenants’ incomes.
Citizens Advice is urging the government to introduce stronger measures in the upcoming autumn budget to support struggling households. The charity is calling for targeted utility bill assistance, an increase in local housing allowance, and the removal of the two-child limit on benefits.
Dame Clare Moriarty, chief executive of Citizens Advice, said: “Four million people have simply run out of options and many others are on the cusp of crisis … This is the result of years of successive government inaction on living standards and policy decisions which have made life even harder for struggling households.”
She added that the Labour government had entered office with major promises to improve living standards but has yet to deliver meaningful change.
