Another above inflation increase to the NLW and NMW

Yesterday, during her Budget speech, the Chancellor announced significant increases to both the National Living Wage and the National Minimum Wage. 

The government has accepted the recommendations of the Low Pay Commission and the new rates, which will apply from April 2026 are:

The National Living Wage (payable to workers aged 21 and above) will go up by 4.1% from £12.21 to £12.71. 

Rates for the hourly National Minimum Wage rates will increase:

• By 8.5% for 18 to 20 year-olds - from for from £10.00 to £10.85
• By 6% for apprentices - from £7.55 to £8.00; and
• By 6% for 16-17 year-holds = from £7.55 to £8.00

The accommodation offset will increase by 4.1% from £10.66 to £11.10 per day.

These figures are at the higher end of the predicted range published by the Low Pay Commission during the summer. They are all above the expected inflation rates between April 2026 and April 2026 and will give workers a real-terms pay rise.

Why are these rates so high given the current economic uncertainty?

The Low Pay Commission works within a remit set by the government. It is required to:

• Ensure that the rate does not drop below two-thirds of median earnings for workers in the National Living Wage population
• Take account of the cost of living, including inflation forecasts between April 2026 and April 2027; and
• Take account of the impact on business, competitiveness, the labour market and the wider economy.

There are competing interests at play and balancing these is difficult. It has concluded that the huge increases introduced last year (which ranged from 12-18%) have not had a significant impact on jobs, and a minimal impact on inflation. The biggest drivers of costs for employers are increases to NICs and energy costs.

Is the government still committed to lowering the age rate for the NLW?

Yes, the government wants to NLW to be paid to 18 year-olds. 

Earlier this year the Low Pay Commission asked stakeholders for their views on how to achieve this. One option it considered was to move 20 year olds onto the NLW next year, which would have meant an increase of over 25% in their wage floor. It's decided that is too risky and recommended keeping the rate for 18-20 year olds together for another year.

What about the apprenticeship rate?

The government had previously asked the Low Pay Commission to set rates ‘as high as possible’ without damaging the economic prospects of apprentices. As it is, apprentices will only get a five pence increase. The Low Pay Commission said that it could not recommend higher rates because of the weak progress of apprenticeships for people aged 16-17.

It believes there is merit to reforming the apprentice rate, including exploring the idea of an apprentice minimum wage that is discounted against NMW age rates, and has said it will continue to discuss this with stakeholders over the next year. 

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