BUDGET 2025: Minimum wage & living wage to rise

The government has confirmed the National Minimum Wage and the National Living Wage are set to rise, as part of a package of measures designed to reduce cost of living pressures for lower-income households.

From 1 April 2026, the Living Wage will rise by 4.1% to £12.71 per hour for eligible workers aged 21 and over, increasing the total annual earnings of a full-time worker on the Living Wage by £900.

The government says this will benefit around 2.4m low-paid workers.

Meanwhile, the National Minimum Wage rate for 18–20-year-olds will increase by 8.5% to £10.85 per hour, meaning an annual earnings increase of £1,500 for a full-time worker.

Chancellor Rachel Reeves said in a statement: “I know that the cost of living is still the number one issue for working people and that the economy isn’t working well enough for those on the lowest incomes.

“Too many people are still struggling to make ends meet, and that has to change.

“That’s why today I’m announcing that we will raise the National Living Wage and also the National Minimum Wage, so that those on low incomes are properly rewarded for their hard work.”

Our view

This sounds on paper like great news for lower income workers, but we are concerned that this will either drive up prices for consumers or will lead to a rise in redundancies as small businesses look to cover their increased costs – neither of which will benefit lower-income households in the long run.

Small businesses are already under a lot of pressure and many will not be able to shoulder these higher wages without making cuts or price hikes. Hopefully the Chancellor has some tricks up her sleeve to relieve pressure on businesses to make sure this works for everyone and delivers the intended benefits.