National Living Wage to Rise by 4.1% in 2026
National Living Wage Set for 4.1% Increase
The UK government has confirmed that the National Living Wage (NLW) will rise by 4.1%, reaching £12.71 per hour from 1 April 2026. This above-inflation increase aims to support lower-paid workers but brings new considerations for contractors and employers across the UK.
“These changes mean that from April, the national minimum wage and the national living wage will boost the pay packets of around 2.7 million workers.”
— Chancellor Rachel Reeves
Key Wage Increases at a Glance
| Category | Current Rate | New Rate (April 2026) | Increase (%) |
|---|---|---|---|
| National Living Wage (21+) | £12.21 | £12.71 | 4.1% |
| National Minimum Wage (18-20) | £10.00 | £10.85 | 8.5% |
| NMW (16-17 & Apprenticeships) | £7.55 | £8.00 | 6.0% |
Full-time NLW workers will see their annual pay rise to £24,784.50 (based on a 37.5-hour week).
18–20-year-olds on NMW will receive an extra £1,500 per year.
Context and Impact
This year’s NLW increase is more moderate than the previous 6.7% hike, aligning more closely with current inflation (3.4%). While welcomed by many, the move prompts a mix of reactions:
Positive for workers: More disposable income, especially for younger or lower-paid staff.
Challenging for employers: The rise follows a recent National Insurance increase, adding £24bn per year in costs for UK businesses.
Voices from Across the Sector
Trade Unions:
Paul Nowak, TUC General Secretary, stated:
“The government is delivering on its promise to make work pay. With living costs stubbornly high, an above-inflation pay rise will make a real difference to the lowest paid.”
Business Groups:
Rain Newton-Smith, CEO of the CBI, warned:
“A year on from a Budget that turned to business to plug a hole… with two-thirds of those taxes hitting business before you’ve even made a profit. Raising uncertainty, investment paused, projects on hold.”
Economists:
Mohamed El-Erian, respected global economist, commented:
“The scale of the hikes will surprise many, not least because they may cut against the government’s stated ambition to tackle the ‘crisis of opportunity’ facing younger workers, particularly if higher labour costs ultimately limit hiring.”
What Does This Mean for UK Contractors?
Payroll and budgeting: Contractors supplying or employing staff on hourly rates must review wage structures and contracts in advance of April 2026.
Client pricing: Increased wage costs may necessitate conversations with clients about contract rates or project budgets.
Competitive advantage: Businesses that already pay above the minimum can use this to attract and retain talent.
Looking Ahead: Navigating Wage Changes
With further pressure on employment costs, contractors and businesses should consider:
Reviewing staffing models and productivity strategies.
Assessing the impact on project costs, especially for long-term contracts.
Exploring technology or process streamlining to offset rising wage bills.
Putting more money in people’s pockets is good for workers and good for the economy as it goes straight back into our high streets and local businesses.
Sources and Further Reading
In Summary
The NLW and NMW increases from April 2026 represent a significant shift for the UK workforce. While millions will benefit from higher earnings, contractors and employers must plan for increased wage costs and potential impacts on recruitment and business growth. Staying ahead of these changes is key—register for updates and seek expert advice as the changes approach.
