The minimum wage for those over 21 will rise again to £12.71 from April & more related News Here

The government has announced ahead of Wednesday’s Budget that millions of people are going to have their salaries increased from April due to an increase in the minimum wage.

The hourly rate for those over 21 will rise by 50p to £12.71, for workers aged 18-20 by 85p to £10.85, and under 18s and apprentices will rise by 45p more to £8 an hour.

Chancellor Rachel Reeves said 2.7 million people would benefit from the increase, which will come into effect from April next year.

However, businesses have warned that further increases in the minimum wage could result in hiring freezes.

Minimum wage increases last year were 6.7% for over-21s and 16.3% for 18 to 20-year-olds respectively, when employers’ National Insurance contributions also increased.

As well as increasing the minimum wage, the government has confirmed the extension of the so-called “sugar tax” to include milk-based drinks.

The extension of the Help to Save scheme, which encourages people on low incomes to save money, has also been confirmed.

Other possible announcements on Wednesday include reducing the tax-free allowance for Cash Isa and changes to stamp duty.

The Treasury said the new minimum wage rates for 2026 struck a balance between “the needs of workers, affordability and employment opportunities for businesses”.

But higher wages increase operating costs for firms, which may respond by reducing hiring, giving smaller pay increases to other workers, or raising prices for customers.

There is widespread evidence that employers took some or all of these steps last year, following previous raises and tax increases.

However, the Low Pay Commission – the government agency that recommended the increase – said it believed the previous minimum wage increase for people over the age of 21 “had no significant negative impact on jobs”.

Reeves said the cost of living is still the biggest issue for working people.

“The economy is not doing well enough for the lowest-income people,” he said.

• The minimum wage for those over 21, known as the national living wage, will rise by 4.1%. For someone working full-time (37.5 hours a week), this equates to £24,784.50, more than £900 a year.
• The minimum wage for 18 to 20 year olds, known as the national minimum wage, will increase by 8.5%. For someone working 20 hours a week, this would be £21,157.50, The government has said it wants to phase out a separate band for this age group, and establish a single rate for all adults
• The minimum wage for 16 and 17 year olds and apprentices will increase by 6%

The Real Living Wage is an unofficial hourly rate of pay maintained by the Living Wage Foundation charity.

It is aimed at UK workers aged 18 and over, but it is voluntary and companies can choose whether they want to pay for it or not. Salary increases every October.

Katherine Chapman, director of the Living Wage Foundation, welcomed the increase, but said it still fell short of covering the cost of living.

“This will still be lower than the voluntary real living wage which is the only wage rate based on the cost of living. The real living wage is currently £13.45 in the UK, compared to a higher rate of £14.80 in London.”

Ms Chapman said 16,000 employers had already committed to going beyond the legally required minimum.

The Resolution Foundation think tank, which focuses on low- to middle-income families, said the increase was “unnecessarily large” for 18- to 20-year-olds and could make it harder for people in that age group to find jobs.

“If they stop companies from hiring and push NEET, they risk doing more harm than good [not in education, employment or training] Rates.”

But the Trades Union Congress (TUC) said phasing out the separate rate for 18 to 20-year-olds was “absolutely the right decision”.

Paul Novak, general secretary of the TUC, said, “With the cost of living so high, a wage rise above inflation will make a real difference to the lowest paid.”

“Young workers have bills just like everyone else and they deserve a fair day’s pay for a fair day’s work. It’s right that they are seeing big increases as the youth rate slowly ends.”

Kate Nicholls, chair of UK Hospitality, a trade body that represents more than 700 companies and 123,000 venues in the hospitality industry, called on the Chancellor to reduce the industry’s tax burden “if businesses hope to maintain this level of annual wage growth”.

“Hospitality businesses have seemingly reached their limits in absorbing endless additional costs. They will all go straight to the consumer, ultimately fueling inflation.”

Jane Gratton, deputy director of public policy at the British Chambers of Commerce, said that each wage increase above inflation “leads to higher business costs, less investment and fewer opportunities for individuals”.

“There is a limit to how much additional cost employers can bear without paying anything,” he said.

Philippa Stroud, chair of the Low Pay Commission, said it had considered the impact the pay rise would have on employers.

Baroness Stroud, a Conservative peer, said: “In our discussions with workers and employers this year, it has become clear that no one is having an easy time.”