IT budgets at well-run organisations typically run 2–7% of total revenue, but the real challenge isn't the total budget - it's allocating it correctly between infrastructure, security, applications, and people. This template and planning framework ensures you can present a defensible IT budget to leadership and withstand scrutiny at board level.
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IT Budget Categories
| Category | What It Covers | Typical % of IT Spend |
|---|---|---|
| IT Staffing & Personnel | Salaries, contractor rates, training, recruitment fees | 35–45% |
| Cloud & Infrastructure (Run) | AWS/Azure/GCP, SaaS subscriptions, hosting fees, storage, monitoring | 20–30% |
| Security | EDR, SIEM, pen testing, training, cyber insurance, compliance tools | 10–15% |
| Hardware (CapEx) | Laptops, servers, networking equipment, peripherals | 5–10% |
| Software Licences | M365, Adobe, Figma, Atlassian, Salesforce, ERP custom licences | 10–15% |
| Projects & Innovation (Change) | Digital transformation, new system implementations, R&D | 10–20% |
| Contingency / Unplanned | Security incidents, urgent replacements, scope changes | 5–10% |
IT Staffing & Personnel
- What It Covers
- Salaries, contractor rates, training, recruitment fees
- Typical % of IT Spend
- 35–45%
Cloud & Infrastructure (Run)
- What It Covers
- AWS/Azure/GCP, SaaS subscriptions, hosting fees, storage, monitoring
- Typical % of IT Spend
- 20–30%
Security
- What It Covers
- EDR, SIEM, pen testing, training, cyber insurance, compliance tools
- Typical % of IT Spend
- 10–15%
Hardware (CapEx)
- What It Covers
- Laptops, servers, networking equipment, peripherals
- Typical % of IT Spend
- 5–10%
Software Licences
- What It Covers
- M365, Adobe, Figma, Atlassian, Salesforce, ERP custom licences
- Typical % of IT Spend
- 10–15%
Projects & Innovation (Change)
- What It Covers
- Digital transformation, new system implementations, R&D
- Typical % of IT Spend
- 10–20%
Contingency / Unplanned
- What It Covers
- Security incidents, urgent replacements, scope changes
- Typical % of IT Spend
- 5–10%
Budget Benchmarks by Company Size
| Company Revenue | IT Budget (% Revenue) | IT Per Employee | CIO / IT Director typical salary | Notes |
|---|---|---|---|---|
| Under £1M | 5–10% | £3,000–5,000/year | Managed service provider (no internal director) | Typically fully outsourced IT |
| £1M–£10M | 3–7% | £4,000–7,000/year | £60,000–£85,000 (Head of IT) | Hybrid: 1–3 internal staff + MSP |
| £10M–£50M | 2–5% | £5,000–8,000/year | £80,000–£110,000 | Small IT team (3–8 people) |
| £50M–£250M | 2–4% | £6,000–10,000/year | £100,000–£150,000 | Dedicated team, may have cloud architect and security |
| £250M+ | 1.5–3% | £8,000–15,000/year | £150,000+ CIO | Full IT department: ops, security, development, architecture |
Under £1M
- IT Budget (% Revenue)
- 5–10%
- IT Per Employee
- £3,000–5,000/year
- CIO / IT Director typical salary
- Managed service provider (no internal director)
- Notes
- Typically fully outsourced IT
£1M–£10M
- IT Budget (% Revenue)
- 3–7%
- IT Per Employee
- £4,000–7,000/year
- CIO / IT Director typical salary
- £60,000–£85,000 (Head of IT)
- Notes
- Hybrid: 1–3 internal staff + MSP
£10M–£50M
- IT Budget (% Revenue)
- 2–5%
- IT Per Employee
- £5,000–8,000/year
- CIO / IT Director typical salary
- £80,000–£110,000
- Notes
- Small IT team (3–8 people)
£50M–£250M
- IT Budget (% Revenue)
- 2–4%
- IT Per Employee
- £6,000–10,000/year
- CIO / IT Director typical salary
- £100,000–£150,000
- Notes
- Dedicated team, may have cloud architect and security
£250M+
- IT Budget (% Revenue)
- 1.5–3%
- IT Per Employee
- £8,000–15,000/year
- CIO / IT Director typical salary
- £150,000+ CIO
- Notes
- Full IT department: ops, security, development, architecture
Security underspending is common
Industry benchmarks suggest 10–15% of the IT budget should be spent on security. Most UK mid-market companies spend under 6%. After a ransomware attack costing average £1.1M, the cost of underspending becomes clear.
Annual IT Budget Planning Worksheet
IT BUDGET - FY[YEAR] - [Organisation Name]
Prepared by: [IT Manager / CIO] | Date: [Date] | Version: [1.0]
═══════════════════════════════════════════════════
SECTION 1: OPERATING EXPENDITURE (OPEX) - Monthly Recurring
═══════════════════════════════════════════════════
Cloud Infrastructure
AWS/Azure/GCP compute & storage: £______/month × 12 = £______
CDN & bandwidth costs: £______/month × 12 = £______
Cloud security services: £______/month × 12 = £______
SaaS Subscriptions
Microsoft 365 Business Premium: £______/month × 12 = £______
Atlassian (Jira/Confluence): £______/month × 12 = £______
Slack/Teams additional licences: £______/month × 12 = £______
Other SaaS (list all): £______/month × 12 = £______
Security
EDR/Antivirus platform: £______/month × 12 = £______
SIEM/SOC service: £______/month × 12 = £______
Cyber insurance premium: £______/year = £______
Annual pen test / vulnerability scan:£_____/year = £______
Connectivity & Telco
Business broadband / leased lines: £______/month × 12 = £______
Mobile contracts: £______/month × 12 = £______
VPN / SD-WAN: £______/month × 12 = £______
Support & Managed Services
MSP retainer: £______/month × 12 = £______
Vendor support contracts: £______/year = £______
OPEX TOTAL: £______
═══════════════════════════════════════════════════
SECTION 2: CAPITAL EXPENDITURE (CAPEX) - One-Off
═══════════════════════════════════════════════════
Laptop/desktop replacements: £______ (qty: ___ × £_____)
Server / NAS / UPS hardware: £______
Networking equipment: £______
Mobile devices: £______
Licences (perpetual): £______
Project / transformation spend: £______
CAPEX TOTAL: £______
═══════════════════════════════════════════════════
SECTION 3: HEADCOUNT
═══════════════════════════════════════════════════
Internal IT staff cost (salary + NI + pension):
[Role]: £______ | [Role]: £______ | Total: £______
Contractors / interim: £______
Training & certification budget: £______ (£___ per head × ___ staff)
Recruitment (if planned): £______
HEADCOUNT TOTAL: £______
═══════════════════════════════════════════════════
GRAND TOTAL IT SPEND: £______
As % of company revenue: ____%
Per employee: £______
Y-o-Y change vs last year: +/-____% (£______)
═══════════════════════════════════════════════════CapEx vs OpEx: What Goes Where
| Item | CapEx or OpEx? | Notes |
|---|---|---|
| New laptops / desktops | CapEx | Physical hardware with useful life >1 year is typically capitalised |
| Laptop refresh (lease) | OpEx | Device-as-a-service (DaaS) model keeps hardware off the balance sheet |
| On-premise server hardware | CapEx | Depreciates over 3–5 years. Consider cloud migration to shift to OpEx. |
| AWS / Azure monthly bill | OpEx | Per-usage cloud spend is an operating expense, not a capital investment |
| Custom software development (internal) | CapEx or OpEx | If it creates a long-term asset, may qualify as CapEx (consult your CFO/auditor) |
| SaaS subscriptions (M365, Jira, etc.) | OpEx | Subscription licences are expenses, not assets |
| Cisco switches / firewalls | CapEx | Network hardware with 5+ year useful life |
| Cloud Reserved Instances (1-year) | OpEx or CapEx | Treatment varies - some treat as CapEx prepayment, others as OpEx. Confirm with finance. |
New laptops / desktops
- CapEx or OpEx?
- CapEx
- Notes
- Physical hardware with useful life >1 year is typically capitalised
Laptop refresh (lease)
- CapEx or OpEx?
- OpEx
- Notes
- Device-as-a-service (DaaS) model keeps hardware off the balance sheet
On-premise server hardware
- CapEx or OpEx?
- CapEx
- Notes
- Depreciates over 3–5 years. Consider cloud migration to shift to OpEx.
AWS / Azure monthly bill
- CapEx or OpEx?
- OpEx
- Notes
- Per-usage cloud spend is an operating expense, not a capital investment
Custom software development (internal)
- CapEx or OpEx?
- CapEx or OpEx
- Notes
- If it creates a long-term asset, may qualify as CapEx (consult your CFO/auditor)
SaaS subscriptions (M365, Jira, etc.)
- CapEx or OpEx?
- OpEx
- Notes
- Subscription licences are expenses, not assets
Cisco switches / firewalls
- CapEx or OpEx?
- CapEx
- Notes
- Network hardware with 5+ year useful life
Cloud Reserved Instances (1-year)
- CapEx or OpEx?
- OpEx or CapEx
- Notes
- Treatment varies - some treat as CapEx prepayment, others as OpEx. Confirm with finance.
What’s next?