BUDGET 2026: Minimum wage set to rise by nearly 4%

Chancellor John Healey has announced an increase in the minimum wage, meaning millions of workers are set for a pay rise next year.

The rate paid to workers aged 21 ​and over, currently £12.71 an hour, and the rate payable to workers aged ‌18-20, now £10.85, will both rise by 3.9%.

The increase means the National Living Wage will increase ​to £13.21 an hour and the 18-20 National Minimum Wage will be £11.27.

The announcement means younger workers will continue to receive a lower hourly minimum wage than their older colleagues doing the same job.

The decision comes amid concerns about youth unemployment, with some employers warning that higher wage costs could make them more reluctant to recruit younger staff. However, campaigners argue that young people should receive the same minimum wage as older workers.

What does this mean if you’re aged 18–20?

If you’re paid the minimum wage, you’ll receive an extra 42p an hour, taking your hourly pay to £11.27 from April 2027.

If you work 35 hours a week throughout the year, that could mean an extra £764 a year before tax, assuming your hours stay the same.

However, you’ll still earn less per hour than someone aged 21 or over doing the same job on the minimum wage. The increase also means younger workers will continue to be paid at a lower rate, rather than moving towards equal minimum pay with older workers.

If you’re looking for work, the Government’s decision reflects concerns that higher wage costs could discourage some employers from taking on younger staff. Whether the change affects job opportunities remains to be seen.

What does this mean if you’re aged 21 or over?

If you’re earning the National Living Wage, your hourly pay will rise by 49p to £13.20 from April 2027.

For someone working 35 hours a week all year, that’s an extra £892 a year before tax, provided their hours remain unchanged.

The increase could help with everyday costs, including food, bills and transport. However, how much better off you’ll feel will depend on how prices change and whether you receive any other pay increases.

Remember, these figures relate to the minimum wage rates. If you’re already paid more than the new minimum for your age group, your employer won’t automatically have to increase your pay by the same amount.

What does this mean if you’re under 18?

If you’re aged 16 or 17 and above compulsory school-leaving age, you’re entitled to the National Minimum Wage. The current rate is £8 an hour and it looks like that isn’t changing after today’s Budget.

The likely explanation is that the Government has prioritised keeping younger people in work over increasing the minimum wage for every age group by the same amount, as they’re worried employers will choose older, more experienced workers if everyone costs the same.

There are also differences in employment for under-18s.

For example, workers under 18 face strict legal restrictions on the total number of hours they can work per week, night shifts, and certain high-risk job roles.

In addition, employers often argue that under-18s require significantly more supervision, onboarding, and basic skills training.

It could be argued that a lower starting wage is intended to offset these factors, although it’s understandable that under-18s might feel it’s very unfair to see their older colleagues getting a pay rise that they aren’t benefiting from.