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The government has announced a rise in the minimum wage rates effective from April, benefitting millions of workers across the country. For individuals aged over 21, the minimum hourly rate will increase by 50p, reaching £12.71. Those aged 18 to 20 will see their pay rise by 85p to £10.85 per hour, while under-18s and apprentices will receive an additional 45p, bringing their rate to £8 an hour. Chancellor Rachel Reeves highlighted that approximately 2.7 million people will gain from these adjustments starting next year.
This increase builds upon last year’s rises, which were 6.7% for over-21s and a significant 16.3% for 18 to 20-year-olds. Those pay adjustments coincided with a hike in employers’ National Insurance contributions. Alongside the wage changes, the government confirmed further measures like extending the sugar tax to cover milk-based drinks and broadening the Help to Save scheme, aimed at encouraging people with low incomes to build savings. Additional potential announcements around tax-free allowances for certain savings accounts and revisions to stamp duty are also expected in the upcoming budget.
The Treasury described the new minimum wage levels for 2026 as carefully balancing the needs of workers, business affordability, and employment opportunities. However, higher wages also increase operating costs for companies, potentially causing them to halt hiring, limit pay rises for other employees, or raise prices for consumers. Evidence from the past year shows that many employers have already taken some of these measures following previous wage and tax increases. Despite these challenges, the Low Pay Commission stated that past wage hikes for individuals over 21 “have not had a significant negative impact on jobs.” Chancellor Reeves emphasized that the cost of living remains the biggest concern for workers, declaring, “The economy isn’t working well enough for those on the lowest incomes.”
Regarding the specific wage increases, the over-21 minimum wage, known as the National Living Wage, will grow by 4.1%, translating to about £900 more annually for a full-time worker. For 18 to 20-year-olds, the 8.5% rise means higher earnings even for those working fewer hours. The government also intends to phase out the separate category for this age group, aiming to introduce a single minimum wage rate for all adults. Those aged 16 and 17, as well as apprentices, will experience a 6% pay increase. Despite this progress, the voluntary Real Living Wage, set independently by the Living Wage Foundation, remains above the official minimum rates at £13.45 nationwide and £14.80 in London. Katherine Chapman of the Foundation welcomed the increases but noted they “still fall short of the voluntary real living wage.”
The impact on businesses has drawn concern from industry representatives. Kate Nicholls, chair of UK Hospitality, urged the government to reconsider the tax burden on the sector, warning that businesses have hit their limit absorbing additional costs and that these will likely be passed on to consumers, fueling inflation. Similarly, Jane Gratton from the British Chambers of Commerce highlighted that every wage increase above inflation results in higher business expenses, reduced investment, and fewer employment opportunities. Philippa Stroud, chair of the Low Pay Commission, acknowledged the difficulties faced by both employers and workers, saying, “In our discussions this year with workers and employers alike, it has been clear that no one is having an easy time.
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