How much should your IT budget be?

If you’re running a business with around 20 staff and a turnover close to £1 million, you’re probably asking yourself how much to put aside for IT. It’s a fair question. Technology is baked into almost everything we do now, so getting the budget right matters.

There’s no one-size-fits-all number, but most small and medium-sized businesses in the UK spend between 4% and 7% of their annual revenue on IT. That means you’re likely looking at an IT budget somewhere between £40,000 and £70,000 a year.

Let’s use a £1 million turnover and 20 staff as a working example. That’s a common setup and gives us a useful starting point. If you fall on either side of that, the same approach still applies; you just scale it up or down.

A typical business spending around £50,000 a year on IT might divide it like this:

This includes day-to-day IT support, system monitoring, patching, and occasionally basic cybersecurity. If you’re using a managed IT services provider (MSP), this will be your biggest monthly cost. At around £75 per user per month, support for 20 staff adds up to about £18,000 a year.

If your business relies on its systems to stay productive, having fast, reliable support isn’t optional. You don’t want staff stuck waiting when something breaks.

This includes laptops, desktops, monitors, networking equipment and other devices. Most businesses should refresh equipment every 3 to 4 years to avoid performance issues. Budgeting around £500 per device per cycle keeps things running smoothly.

Microsoft 365, antivirus, backup tools, and line-of-business software all live here. Most software is subscription-based now. For 20 users, this cost builds up quickly. Expect to spend between £40 and £60 per user per month, depending on your team’s needs.

You need to protect your data and systems. That means more than just antivirus. It should include endpoint protection, backups, multi-factor authentication, and employee training. A ransomware attack or data breach can cost far more than this in downtime or fines.

Many businesses use cloud file storage or host their main applications in the cloud. Services such as Microsoft SharePoint, hosted desktops, or off-site backup solutions often fall into this category.

This is about ensuring your IT infrastructure keeps pace with your business. Someone needs to look ahead, manage risk, and help you avoid nasty surprises. It could be a service offered by your MSP or an external consultant.

For most SMEs, IT spending works out to around £2,500 per employee per year. That figure helps when you’re budgeting for growth. If you plan to take on five more people, you’ll want to add another £12,500 to your IT budget.

If your business is smaller, with 5 to 10 employees, you may get by with a basic IT setup and a lighter support package. That could bring your spend closer to £1,000 to £1,500 per user per year, especially if you’re cloud-based and working from standard tools.

On the other hand, larger companies often spend more per person, not less. That’s because they’ve got more systems to maintain, higher cybersecurity risks, and more users needing help. They’re also more likely to bring in internal IT staff or use advanced tools.

Your sector affects how much you need to spend.

• Financial services, healthcare, and law firms typically spend more, often closer to 7% of revenue. That’s because they handle sensitive data, face regulatory pressure, and can’t afford downtime.

• A small construction firm or retail business might spend less. Their systems are simpler, and the risk of data loss or cybercrime might be lower.

So if you’re asking, how much should a business spend on IT, the answer will always depend on what you do, how you work, and what’s at stake when something goes wrong.

A reasonable IT budget should support your team, protect your business, and give you room to grow. If you’re turning over around £1 million, a £50,000 annual budget is a solid place to start. Spend it in the right areas and you’ll avoid bigger problems later on.

If you’re unsure where your current spending is going or if you’re overspending in the wrong areas, it’s worth taking a step back and examining the whole picture. That’s something we help businesses do all the time.

Want to review your setup? We’re happy to talk through it.