Millions are poised to receive a pay increase starting in April, following the government’s announcement of a minimum wage hike ahead of Wednesday’s Budget statement.
The hourly rate for those over 21 will rise by 50p to £12.71. Workers aged 18-20 will see an 85p increase to £10.85, while under-18s and apprentices will receive an additional 45p, bringing their hourly wage to £8.
Chancellor Rachel Reeves stated that an estimated 2.7 million individuals will benefit from these increases, scheduled to take effect next April.
However, businesses have cautioned that further minimum wage increases could lead to hiring freezes .
These minimum wage increases build upon the previous year’s 6.7% rise for those over 21 and a 16.3% increase for 18 to 20-year-olds. The previous uplift also coincided with a rise in employer National Insurance contributions.
In addition to the minimum wage adjustments, the government has confirmed an expansion of the “sugar tax” to encompass milk-based beverages.
Also confirmed is the expansion of the Help to Save scheme, designed to incentivize savings among low-income earners.
Other potential announcements on Wednesday include adjustments to the tax-free allowance for cash ISAs and potential changes to stamp duty.
The Treasury has stated that the new minimum wage rates for 2026 are intended to strike a balance between “the needs of workers, the affordability for businesses, and the opportunities for employment.”
However, wage increases elevate operational costs for businesses, which may respond by curtailing hiring, offering lower pay increases to other employees, or raising prices for consumers.
Evidence suggests that employers have taken some or all of these steps in the past year, following previous hikes and tax increases.
The Low Pay Commission, the government agency that recommended the increases, stated that previous minimum wage increases for individuals over 21 “had not had a significant negative impact on jobs.”
Reeves emphasized that the cost of living remains the foremost concern for working individuals.
“The economy isn’t working well enough for those on the lowest incomes,” she added.
The Real Living Wage, an unofficial hourly rate of pay, is overseen by the Living Wage Foundation charity.
It targets UK workers aged 18 and over, is voluntary, and firms can choose whether or not to pay it. The rate is reviewed every October.
Katherine Chapman, director of the Living Wage Foundation, welcomed the increase but noted it still falls short of covering the cost of living.
“It will still fall short of the voluntary real living wage, which is the only wage rate based solely on the cost of living. The real living wage is currently £13.45 in the UK, with a higher rate of £14.80 in London.”
Ms. Chapman pointed out that 16,000 employers have already committed to exceeding the legally required minimum.
The Resolution Foundation, a think tank focusing on low-to-middle-income households, deemed the increase for 18-to-20-year-olds “unnecessarily big” and suggested it could hinder job prospects for this age group.
“These steep increases risk causing more harm than good if they put firms off hiring and push up NEET [not in education, employment, or training] rates.”
However, the Trades Union Congress (TUC) stated that phasing out the separate rate for 18-to-20-year-olds was “absolutely the right call.”
“With living costs stubbornly high, an above-inflation pay rise will make a real difference to the lowest-paid,” added TUC General Secretary Paul Nowak.
“Young workers have bills like everyone else and deserve a fair day’s pay for a fair day’s work. It’s right they see a larger rise as youth rates are phased out.”
Kate Nicholls, chair of UK Hospitality, a trade body representing over 700 companies and 123,000 venues in the hospitality industry, urged the Chancellor to reduce the industry’s tax burden “if businesses are expected to sustain this level of annual wage increase.”
“Hospitality businesses have reached their limit of absorbing seemingly endless additional costs. They will simply all be passed through to the consumer, ultimately fueling inflation.”
Jane Gratton, Deputy Director of Public Policy at the British Chambers of Commerce, added that every above-inflation wage increase “leads to higher business costs, lower investment, and fewer opportunities for individuals.”
“There’s a limit to how much additional cost employers can bear without something having to give,” she said.
The Chair of the Low Pay Commission, Philippa Stroud, stated that the commission had duly considered the effect a raise would have on employers.
Baroness Stroud, a Conservative peer, said, “In our discussions this year with workers and employers alike, it has been clear that no one is having an easy time.”
Chancellor Rachel Reeves is considering both tax rises and spending cuts in the 26 November Budget.
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