Budget Minimum Wage rise - how much workers could get from April 2027

The National Minimum Wage for 18 to 20-year-olds is expected to increase by 3.9%, from £10.85 to around £11.27 an hour, early reports suggest.

That would be a smaller rise than the increases introduced over the past two years, as Labour works towards its manifesto pledge to remove what it called “discriminatory age bands” and move towards a single minimum wage for all adults.

The unconfirmed increase would leave younger workers earning less than those aged 21 and over, whose National Living Wage is expected to rise from £12.71 to £13.20 an hour – also a 3.9% increase, if it were to happen.

The reported 3.9% increase for 18 to 20-year-olds would come after the government increased the rate by a combined 26% since returning to power in 2024, according to the figures cited in the report.

However, the prospect of younger workers continuing to receive a lower hourly rate has drawn criticism from unions.

Andrea Egan, general secretary of Unison, said it was “deeply unfair” to pay different rates for the same job.

“Twenty year-old care workers, teaching assistants and security guards do the same work as their older colleagues,” she said. “They don't pay less in the supermarket or at the petrol pump. They must be paid equally.”

Government announces series of cost-of-living measures

The government has not yet confirmed the rates, which are expected to be announced as part of Chancellor John Healey’s Budget.

Ahead of the Budget, the government has announced a series of measures it says are designed to give families more “breathing space” with the cost of living.

These include removing import tariffs on more than 100 food items, changes to Carer’s Allowance, adjustments to tax-free mileage rates and extending paternity pay to eligible self-employed fathers.

The government says removing tariffs from 100 food items could save households up to £21 a year – around 40p a week – when combined with tariff suspensions introduced in June.

Other measures announced already include:

• Tax-free mileage rates: Making permanent the 55p-per-mile tax-free rate for the first 10,000 business miles, with the rate for mileage above that level rising from 25p to 35p per mile.
• Carer’s Allowance: Replacing the current earnings cliff edge with a taper, allowing eligible carers to earn above the existing limit without immediately losing their entire allowance. The change is not due to come into effect until 2030.
• Paternity pay: Extending two weeks of paternity pay to eligible self-employed fathers, who have previously missed out on payments of up to £194 a week.
• Post Office parcel drop boxes: Rolling out hundreds of additional boxes to make it easier to send parcels.

Real Living Wage vs National Living Wage: what is the difference?

The real Living Wage and the Government’s National Living Wage are often confused, but they are different pay rates with different purposes.

The National Living Wage is the legal minimum employers must pay eligible workers aged 21 and over. The real Living Wage is a voluntary rate calculated independently to reflect the cost of living, with a separate, higher rate for London.

The real Living Wage currently stands at £14.10 an hour across the UK and £15.45 in London.

• National Living Wage: The Government’s legal minimum hourly rate for eligible workers aged 21 and over.
• National Minimum Wage: The legal minimum for younger workers, with rates varying by age and apprenticeship status.
• Real Living Wage: A voluntary hourly rate independently calculated to reflect the cost of essential goods and services.
• London Living Wage: The real Living Wage rate for London, where living costs are recognised as being higher.

The key difference is that the Government’s rates are legal minimums, while the real Living Wage is a voluntary benchmark based on the cost of living.

What are the current minimum wage rates?

• National Minimum Wage for 18 to 20-year-olds: £10.85 an hour.
• National Living Wage for workers aged 21 and over: £12.71 an hour.
• Real Living Wage outside London: £14.10 an hour.
• Real Living Wage in London: £15.45 an hour.

Employers must pay the applicable legal minimum wage. They can choose to pay more, including by signing up to the real Living Wage scheme.

How much more could you earn on the real Living Wage?

The difference can add up over a full-time working year.

Based on a 37.5-hour week and 52 paid weeks, the annual figures are:

• £10.85 an hour: £21,157.50 a year.
• £12.71 an hour: £24,784.50 a year.
• £14.10 an hour: £27,495 a year.
• £15.45 an hour: £30,127.50 a year.

On these figures, the real Living Wage is worth £2,710.50 more a year than the National Living Wage outside London.

The London rate is worth £5,343 more a year than the £12.71 National Living Wage.

These are gross earnings before tax, National Insurance or other deductions, and assume 37.5 paid hours every week throughout the year.

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Who is entitled to the real Living Wage?

The real Living Wage is a voluntary employer commitment that covers workers aged 18 and over.

Nearly 17,000 employers, including IKEA, KPMG and LUSH, have signed up to pay it, according to the Living Wage campaign. The movement says almost half a million workers receive a pay increase each year as a result.

However, workers do not automatically have a legal right to the real Living Wage. They are entitled to the statutory minimum that applies to them unless their employer has committed to a higher rate or their contract provides for one.