National living wage rate rises 4.1%

Sara White, Editor, Business & Accountancy Daily. Croner-i

Above inflation rises for minimum wage kick in from 1 April as national living wage increases to £12.71 for workers aged over 21, day one statutory sick pay starts on 6 April.

The national living wage for over-21s will increase by 50p per hour from 1 April to £12.71 from £12.21, while the national minimum wage goes up by 8.5% to for 18 to 20-year-olds to £10.85 per hour from £10, narrowing the gap with the NLW.

This will mean an annual earnings increase of £1,500 for a full-time worker on national minimum wage, and marks further progress towards the government’s goal of phasing out 18 to 20-year wage bands and establishing a single adult rate.  

For a full-time worker on the national living wage, that means an increase in pay of £900 a year, and a £1,500 increase for someone on the national minimum wage, working full time. 

This means a worker on a 37.5 hour working week would earn £24,784.50 per annum. This is just below the median real terms graduate salary of £26,500, according to Department for Education figures. It is also perilously close to the new threshold for starting to pay student loans.

Jon Hickman, a tax partner at BDO said: ‘Businesses are unlikely to face the same level of cost increases they experienced in April 2025, but the changes to the national living wage will be challenging to absorb, particularly for companies that employ large numbers of younger staff, notably in the retail and hospitality sectors.’

Rates effective 1 April 2026

Type	NMW rate	Increase £	Increase %
National Living Wage (21 and over)	£12.71	50p	4.1
18-20 year old rate	£10.85	85p	8.5
16-17 year old rate	£8.00	45p	6
Apprentice rate	£8.00	45p	6
Accommodation offset	£11.10	44p	4.1

Businesses paying the Construction Industry Training Board Levy are also likely to see increases in their levy payments unless their total wage bill (including subcontractors) is less than £150,000.

Alongside this, from 6 April the lower earnings limit and waiting period will be removed for statutory sick pay (SSP), while paternity leave and unpaid parental leave will become a day one employment right.

From the new tax year 2026-27, statutory sick pay will have to be paid from the first day of absence, instead of the fourth day as it is currently, and low earners will become entitled to SSP as the lower earnings limit is removed, increasing costs for employers.

It will be payable to all eligible employees regardless of their earnings, payable from the first full day of sickness absence and paid at 80% of an employee’s average weekly earnings (AWE) or the uprated weekly flat rate of £123.25, whichever is lower. Based on government estimates, the extension of sick pay is expected to cost employers £420m a year.

HMRC has also clarified payment requirements if employee sickness straddles old and new rules, and for those on longer term absences.

The detailed HMRC SSP guidance states: ‘If an employee started their sickness absence before 6 April 2026 but was not entitled to SSP because they earned below the LEL, they may be entitled to SSP from 6 April 2026.’

HMRC clarified: ‘An employee will be entitled to SSP from 6 April 2026 if their sickness absence started on or:

• after 22 September 2025;

• before 21 September 2025, but they had periods where they returned to work between 22 September 2025 and 5 April 2026.

‘For these employees, you should calculate their AWE based on the period before their sickness absence (or their first sickness absence if it is a linked period). They will be entitled to their weekly rate of SSP for up to 28 weeks.’

The changes coincide with the creation of the new Fair Work Agency on 7 April. The new enforcement body replaces the current spaghetti of quangos, including the Gangmaster and Labour Abuse Authority, Director of Labour Market Enforcement, Employment Agency Standards Inspectorate, and HMRC’s National Minimum Wage Unit, to create a single agency responsible for employment rights enforcement. It will have powers to inspect workplaces, impose penalties, start civil proceeding and recover costs from employers.