The National Living Wage and National Minimum Wage rates increased on 1 April 2026. If you employ staff, you must ensure your payroll reflects the new rates from this date. Underpaying minimum wage is a criminal offence and can result in penalties, back-pay orders, and public naming by HMRC.
The New Rates from 1 April 2026
| Category | Rate from 1 Apr 2026 | Previous Rate (2025/26) | Increase |
|---|---|---|---|
| National Living Wage (age 21+) | £12.71/hr | £12.21/hr | +£0.50 |
| 18–20 National Minimum Wage | £10.85/hr | £10.00/hr | +£0.85 |
| 16–17 National Minimum Wage | £8.00/hr | £7.55/hr | +£0.45 |
| Apprentice rate | £8.00/hr | £7.55/hr | +£0.45 |
National minimum wage rates are reviewed annually by the Low Pay Commission and change on 1 April each year. Always verify the current rates at gov.uk/national-minimum-wage-rates before processing payroll.
Who Is Entitled to the Minimum Wage?
The National Minimum Wage applies to almost all workers in the UK, including:
- Part-time workers
- Casual workers and those on zero-hours contracts
- Agency workers
- Workers on probation
- Apprentices (subject to the apprentice rate if under 19, or in the first year of apprenticeship)
- Homeworkers paid per piece or task
The following are not entitled to the minimum wage:
- Self-employed people
- Company directors (unless they have a contract of employment)
- Volunteers and genuine work-experience placements
- Family members working in a family business and living in the family home
What Counts Towards Minimum Wage Pay?
HMRC calculates the hourly rate by looking at gross pay for a pay reference period divided by the number of hours worked. It is not simply what appears on the payslip. In particular:
- Tips and gratuities paid through the payroll do not count toward minimum wage (since 1 October 2024)
- Salary sacrifice arrangements reduce pay for minimum wage purposes — ensure remaining pay is still above the minimum after any deductions
- Deductions for uniform, tools, or accommodation provided by the employer can bring pay below the minimum if not handled correctly
What You Need to Update in Your Payroll
- Review every employee's hourly rate — anyone paid at or near the old minimum wage must be increased to the new rate from 1 April 2026. This includes part-time staff whose annual salary may look fine but whose hourly rate could be below the new minimum when recalculated
- Update your payroll software — most major payroll packages update automatically, but check that the new rates have been applied correctly for the first pay period after 1 April 2026
- Check apprentice rates — apprentices aged 19 or over who have completed their first year of apprenticeship move to the NLW or NMW rate for their age group, not the apprentice rate
- Review salary sacrifice arrangements — if employees have salary sacrifice for pension contributions, check that their remaining pay after sacrifice is still above the minimum wage
- Keep records — you must keep payroll records for at least three years. HMRC can inspect records going back to verify compliance
HMRC Enforcement: The Penalties for Underpayment
HMRC enforces minimum wage compliance actively. The consequences of underpayment are significant:
- Back pay: You must pay workers any amount they are owed, calculated at the current rate (not the rate when the underpayment occurred)
- Financial penalty: A penalty of 200% of the total underpayment, capped at £20,000 per worker
- Public naming: HMRC publishes the names of employers found to have underpaid minimum wage — serious reputational damage
- Criminal prosecution: In the most serious cases, employers can be prosecuted criminally
Many minimum wage breaches are unintentional — arising from salary sacrifice arrangements, deductions for equipment or uniforms, unpaid overtime, or simply failing to update payroll at the April rate change. A payroll review now is far better than an HMRC compliance check later.
The National Living Wage vs The Real Living Wage
The National Living Wage (set by government and legally enforceable) should not be confused with the voluntary Real Living Wage set by the Living Wage Foundation (currently £12.60/hr outside London, £13.85/hr in London). Some employers voluntarily pay the Real Living Wage as part of their employment offer — but only the government-set National Living Wage is legally required.
See HMRC's guidance on current National Minimum Wage rates and employer obligations.
General information only. This article provides general guidance on UK tax and accounting matters and reflects our understanding of legislation and HMRC guidance at the time of publication. Tax rules, rates, and thresholds change frequently. Nothing in this article constitutes personalised tax or financial advice. Always seek advice specific to your circumstances from a qualified accountant before taking action. Ledgertech Accountants Ltd accepts no liability for any loss arising from reliance on this content.
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