Chancellor John Healey confirmed in Budget 2026 on 28 October 2026 that the National Living Wage will rise by 3.9% to £13.21 an hour on 1 April 2027, up from £12.71. Employer National Insurance stays at 15% above an unchanged threshold of £96 a week, and the Employment Allowance stays at £10,500, so the full cost of the pay rise lands on payrolls.
The Treasury says the rise adds £910 a year to a full-time worker's gross pay and will benefit around 2.3 million workers. The government has accepted the Low Pay Commission's recommendations in full.
What changes
All the statutory rates rise by the same 3.9% on 1 April 2027:
- National Living Wage (21 and over): £12.71 to £13.21 an hour
- 18 to 20-year-olds: £10.85 to £11.27 an hour
- 16 to 17-year-olds and eligible apprentices: £8.00 to £8.31 an hour
- Accommodation offset: £11.10 to £11.53 a day
The Overview of Tax Legislation and Rates keeps employer National Insurance at 15% above £96 a week for 2027 to 2028, with 0% on earnings up to £967 a week for staff under 21 and apprentices under 25. The Employment Allowance stays at £10,500 per eligible employer. As previously announced, these thresholds stay at 2026 to 2027 levels until the 2030 to 2031 tax year.
What it means for a small firm
The Treasury's £910 figure, over 52 weeks, implies 1,820 hours a year, or 35 hours a week. We use that assumption below.
Small Cap News calculation: a full-time worker on 35 hours a week earns £23,132.20 a year at £12.71 and £24,042.20 at £13.21. Employer National Insurance on that worker rises from £2,721.03 to £2,857.53. Each full-time National Living Wage employee therefore costs £1,046.50 more a year: £910 in pay and £136.50 in employer National Insurance.
For a firm with five such staff, the wage bill rises by £4,550 to £120,211. After the £10,500 Employment Allowance, employer National Insurance payable goes from £3,105.15 to £3,787.65. Wages plus National Insurance rise by £5,232.50, or 4.4%, to £123,998.65 a year.
Because the allowance is unchanged, it stretches less far. Small Cap News calculation: £10,500 now covers employer National Insurance for about 3.7 full-time National Living Wage staff, down from 3.9. A firm with three pays none; a fourth hire starts the bill.
A full-time 18 to 20-year-old gets £764.40 a year more and a 16 to 17-year-old or apprentice £564.20 more, with no employer National Insurance on either because their pay is below £967 a week.
Cost and reach
The Budget document says the 2.3 million figure is provisional until an impact assessment is published in early 2027. The documents give no count of employers affected, no breakdown by firm size or region, and no cost to business. Our figures leave out pension contributions and holiday pay.
Key facts
- National Living Wage: £13.21 an hour from 1 April 2027, up 3.9% from £12.71
- 18 to 20 rate: £11.27; 16 to 17 and apprentice rate: £8.31
- Employer National Insurance: 15% above £96 a week, unchanged for 2027 to 2028
- Employment Allowance: £10,500, unchanged
- Five full-time staff on the National Living Wage: £5,232.50 a year more in pay and employer National Insurance (Small Cap News calculation)
Source: HM Treasury, "Budget 2026" (chapter 4.5 and table 7.13) and "Budget 2026: Overview of tax legislation and rates", Annex A and paragraph 2.1, published 28 October 2026 (gov.uk); HM Treasury press release "Budget 2026: Breathing space for today, hope for the future", 28 October 2026; Low Pay Commission, April 2026 rates. See also: Data & Surveys, Funding and how to send us your news.