A worked example
Six full-time staff, all aged 21 or over, on the National Living Wage for 37.5 hours a week and 52 paid weeks: 1,950 hours a year each. On top of pay, the business pays employer's National Insurance at 15% above £5,000 a year and the auto-enrolment minimum pension of 3% of earnings between £6,240 and £50,270. None of the six is covered by the Employment Allowance (if they are, the National Insurance line is lower).
| For the six, for a year | Before: £12.71 an hour | After: £13.21 an hour | Difference |
|---|---|---|---|
| Pay (1,950 hours each) | £148,707.00 | £154,557.00 | +£5,850.00 |
| Employer's National Insurance | £17,806.05 | £18,683.55 | +£877.50 |
| Minimum employer pension | £3,338.01 | £3,513.51 | +£175.50 |
| Total cost | £169,851.06 | £176,754.06 | +£6,903.00 |
| Each member of staff | £28,308.51 | £29,459.01 | +£1,150.50 |
The whole difference comes from the higher wage, with National Insurance and pension on it: the Budget did not change the employer's National Insurance rate or threshold.
The other rates from 1 April 2027:
| Rate | April 2026 | April 2027 |
|---|---|---|
| National Living Wage, 21 and over | £12.71 | £13.21 |
| 18 to 20 | £10.85 | £11.27 |
| 16 to 17 | £8.00 | £8.31 |
| Apprentices | £8.00 | £8.31 |
The accommodation offset rises by 3.9% to £11.53 a day.
When it takes effect
On 1 April 2027, across the UK. Until then the April 2026 rates apply, so nothing changes in pay before April. The pension figures use the auto-enrolment earnings band for 2026/27; the Budget documents do not set the band for 2027/28.
Who it doesn't affect
A business whose staff are all paid at least the new rate for their age (£13.21 an hour at 21 and over) has no extra cost from this change. The Budget did not change employer's National Insurance or the pension minimum, so staff already paid above the new rates cost the same as before.
Where this comes from
- Budget 2026 (HM Treasury), policy decisions, "Young people and labour markets": the National Living Wage of £13.21 and the National Minimum Wage rates from 1 April 2027
- Budget 2026 OOTLAR, Annex A, National Insurance contributions: employer's rate 15% above the secondary threshold for 2027/28
- Budget 2026 (HM Treasury), "Additional support for households": the 3.9% increase and the Low Pay Commission's recommendations accepted in full
- Budget 2026 (HM Treasury), "Keeping the government's tax commitments": no increase to the headline rates of National Insurance
- National Minimum Wage and National Living Wage rates (GOV.UK): the rates from April 2026, £12.71 for 21 and over
- Rates and thresholds for employers 2026 to 2027 (HMRC): employer's National Insurance at 15% above the £5,000 secondary threshold
- Autumn Budget 2024: Overview of Tax Legislation and Rates (HMRC), section 2.1: the £5,000 secondary threshold held until 5 April 2028
- Workplace pensions: what you, your employer and the government pay (GOV.UK): the employer minimum of 3% of earnings between £6,240 and £50,270
Every figure on this page comes from the Budget documents published on GOV.UK on , and was checked by Lewis Back ACA. Last updated . It is general information, not advice on your own position.