Check the National Minimum Wage
The right rate by age and apprentice status, with an employer compliance check.
The National Living Wage rose to £12.71 an hour from 1 April 2026, an increase of 50p, or 4.1%, on the previous rate [1]. For a full-time worker on 37.5 hours a week, that single change adds £977 to gross annual pay, around £81.47 a month [1].
The National Living Wage is the statutory minimum hourly rate for workers aged 21 and over, and it is not optional. Every UK employer that pays by the hour, by the shift or by annual salary has to meet it on every pay reference period, and the cost of getting it wrong runs well beyond the arrears owed. The rate sits at the centre of payroll compliance for any business that employs lower-paid staff, particularly in retail, hospitality, care and similar sectors.
This article sets out the current rates for the 2026-27 tax year, explains who qualifies and who does not, shows what counts as pay for minimum wage purposes, and walks through the compliance checks and the penalties that apply when an employer falls short.
Key takeaways
- The National Living Wage is £12.71 an hour for workers aged 21 and over from 1 April 2026, up 4.1% on the previous rate.
- The 18 to 20 rate rose faster, by 8.5% to £10.85, as part of a plan to align it with the adult rate over time.
- The 16 to 17 rate and the apprentice rate both sit at £8.00 an hour.
- Tips, overtime premiums and most allowances never count towards minimum wage pay, even though they are taxable earnings.
- HMRC can charge a penalty of 200% of any underpayment, up to £20,000 per worker, and names employers publicly where arrears exceed £500.
What the National Living Wage is
The National Living Wage is the highest band of the National Minimum Wage, the legal pay floor that applies to almost every worker in the United Kingdom above compulsory school leaving age [2]. It was introduced as a premium rate for older workers and has since been extended downward in age, reaching workers aged 21 and over.
The rate is a legal minimum, not a target or a guideline. An employer cannot contract out of it, and a worker cannot agree to be paid less. Compliance is tested on the average hourly rate across each pay reference period, so a single low week can breach the rules even where the headline contractual rate looks correct.
National Living Wage vs National Minimum Wage
The two terms describe one system with several age bands. The National Minimum Wage covers workers below the age of 21 and apprentices, while the National Living Wage is the specific band for those aged 21 and over [2]. In practice the National Living Wage is simply the top rate within the minimum wage structure, and the same enforcement rules apply across every band.
A separate figure, the real Living Wage, is often confused with the statutory one. The real Living Wage is a voluntary rate calculated independently on the actual cost of living, set at £13.45 across the UK and £14.80 in London [3]. It carries no legal force. Only the National Minimum Wage and National Living Wage are legally enforceable, and those are the rates payroll must apply.
How the rate is set
The rates are recommended each year by the Low Pay Commission, an independent body that advises the government on the minimum wage [4]. The government then accepts, amends or rejects the advice, and the new rates take effect on 1 April. For the latest uprating, the government accepted the Commission's recommendations in full [1].
The National Living Wage is anchored to a target: it should not fall below two-thirds of median hourly earnings for the population it covers [5]. The Commission confirmed that the £12.71 rate meets that two-thirds target for workers aged 21 and over [5]. That anchoring is why the rate rises each year broadly in line with wider wage growth rather than by a fixed percentage.
The minimum wage rates for the 2026-27 tax year
Four statutory rates apply from 1 April 2026, plus the accommodation offset. The table below sets out each rate and the increase it represents on the previous figure.
| Rate | Hourly rate | Increase |
|---|---|---|
| National Living Wage (21 and over) | £12.71 | +50p (4.1%) |
| 18 to 20 year old rate | £10.85 | +85p (8.5%) |
| 16 to 17 year old rate | £8.00 | +45p (6.0%) |
| Apprentice rate | £8.00 | +45p (6.0%) |
| Accommodation offset (daily) | £11.10 | +44p (4.1%) |
The rates are published by the government and change on 1 April each year, so payroll systems need the new figures loaded before the first payrun of April [2]. Software that holds the HMRC Recognised badge applies the updated rates automatically and submits Real Time Information on each payrun, which removes one source of manual error [6].
Why the younger rates rose faster
The 18 to 20 rate rose by 8.5%, roughly double the increase to the adult rate, and this is deliberate [1]. The government's stated ambition is to lower the National Living Wage age to 18, so the younger bands are being pushed up faster to close the gap before the age threshold moves [5].
The Low Pay Commission has set out a staged pathway. Its proposed route lowers the eligibility age to 20 first, then moves 18 and 19 year olds together in a later step, subject to economic conditions at the time [5]. The Commission judged that moving 20 year olds straight onto the adult rate in a single year would have meant an increase of over 25% to their wage floor, which it considered too large a step given the risk to youth employment [5].
The accommodation offset
Accommodation is the only benefit in kind that can count towards minimum wage pay [7]. The offset is set at £11.10 a day, or £77.70 a week, from 1 April 2026 [7].
The offset works in three ways. Where the employer provides free accommodation, the offset amount is added to the worker's pay for minimum wage purposes. Where the employer charges at or below the offset rate, there is no effect on minimum wage pay. Where the employer charges above the offset rate, the excess reduces the worker's minimum wage pay and can push an otherwise compliant wage below the legal floor [7]. This is a frequent trap for employers in hospitality and agriculture who provide live-in accommodation.
Who qualifies for the minimum wage
Almost every worker above compulsory school leaving age is entitled to the minimum wage, and the entitlement is far wider than permanent employees [8]. It covers full-time, part-time and fixed-term staff, and it also covers casual, zero-hours, agency, piece-rate and commission-only workers. Even a one-person business issuing the occasional wage, such as a sole trader paying a single employee, has to meet the same floor.
A small number of groups fall outside the rules. The table below separates the two.
| Entitled to the minimum wage | Not entitled |
|---|---|
| Employees, including part-time and fixed-term | Genuinely self-employed people |
| Casual, zero-hours and agency workers | Company directors with no worker contract |
| Homeworkers and pieceworkers | Volunteers paid only reasonable expenses |
| Commission-only workers | Family members working in the family business and living at home |
| Apprentices (at the relevant rate) | Workers below school leaving age |
A key point for payroll is that minimum wage entitlement is assessed separately from tax status [8]. A worker labelled self-employed for tax may still qualify for the minimum wage if the reality of the working relationship makes them a worker. Employers who misclassify staff to avoid the wage floor carry the arrears risk if HMRC disagrees with the label.
The apprentice rate and its catch
The apprentice rate of £8.00 an hour applies to apprentices under 19, and to apprentices aged 19 or over who are in the first year of their current apprenticeship [2]. The catch sits in the second year. Once an apprentice is 19 or over and has completed the first year, they move to the rate for their age [8].
This trips up more employers than almost any other minimum wage rule. A 21 year old apprentice in the first year is paid £8.00 an hour, but after completing that first year the same apprentice must receive the full National Living Wage of £12.71, a jump of £4.71 an hour [2]. Payroll systems need to flag the anniversary of the apprenticeship start date and the worker's age, not just one or the other, to apply the switch on time.
What counts as pay for minimum wage purposes
Not all earnings count towards the minimum wage. The test uses a narrower definition of pay than the gross figure on a payslip, which is why an employee can appear to be paid above the floor and still be underpaid [9]. The table below separates what counts from what does not.
| Counts towards minimum wage pay | Does not count |
|---|---|
| Basic wages and salary | Tips, gratuities and service charges |
| Bonuses and performance pay | Overtime and shift premiums (the extra element) |
| Commission based on the worker's performance | Allowances such as London weighting or on-call pay |
| Piece-rate payments | Expense reimbursements |
| Accommodation offset (within the limit) | Benefits in kind other than accommodation |
The single most important exclusion is tips. Tips, gratuities and service charges can never count towards minimum wage pay, regardless of how they reach the worker [9]. Separate rules require employers to pass on 100% of tips to workers, so tips sit entirely outside the wage floor and cannot be used to top a basic rate up to the minimum.
Deductions that create an underpayment risk
Some deductions reduce minimum wage pay and can cause an underpayment even where the headline rate is correct [9]. Any deduction for an item connected with the job, such as a uniform, tools, safety equipment or mandatory training, reduces the pay that counts for the minimum wage test. So does any cost the employer transfers to the worker, such as a till shortfall.
Other deductions have no effect on minimum wage pay. PAYE income tax, National Insurance, student loan repayments and genuine pension contributions do not reduce the minimum wage figure [9]. The guiding principle is straightforward: a deduction made primarily for the employer's benefit, or connected with the job, reduces minimum wage pay, while a statutory deduction or one freely chosen by the worker for their own benefit does not.
Salary sacrifice and the minimum wage floor
Salary sacrifice arrangements, where a worker gives up cash pay in exchange for a benefit such as a pension top-up or a cycle scheme, can push cash earnings below the minimum wage [9]. The minimum wage test looks at cash pay after the sacrifice, so a sacrifice that takes a worker below £12.71 an hour in cash terms is a breach even though the worker agreed to it.
Employers therefore cannot offer salary sacrifice to minimum wage workers without checking the cash floor first. Payroll software should flag any arrangement that risks taking a worker below the legal rate, because the worker's agreement is no defence [8]. This is a common and avoidable cause of arrears, particularly where a scheme is rolled out across a whole workforce without checking the lowest-paid staff.
How employers check compliance
Minimum wage compliance is tested over a pay reference period, which is the pay cycle and can never be longer than one calendar month [9]. The check compares total qualifying pay in the period against the total hours worked, and the resulting average hourly rate must meet or exceed the relevant minimum. A worker paid weekly has a weekly reference period, and a worker paid monthly has a monthly one.
How hours are counted depends on the type of work [4]. Time work counts all hours on shift, including waiting and available time. Salaried hours work spreads contracted basic hours across the year. Output work counts actual hours or a fair estimate, and unmeasured work counts actual hours or a written daily average agreement. Getting the hours wrong, for example by not paying for time spent in handover, security checks or compulsory training, is a leading cause of underpayment even where the hourly rate is correct.
Workers are also entitled to an itemised payslip showing gross pay, net pay, each deduction and, where pay varies by time, the number of hours worked [10]. For many SMEs, using HMRC-recognised UK payroll software that calculates the qualifying rate on every payrun is the most reliable way to keep the average above the floor. Accountants running the same check across many employers typically rely on a payroll bureau platform that flags the correct age band and apprentice status per worker.
What happens when an employer underpays
HMRC enforces the minimum wage and has strong powers to recover arrears and punish non-compliance [11]. Where it finds an underpayment, HMRC can issue a Notice of Underpayment requiring the employer to repay all arrears to the affected workers and to pay a penalty on top.
The penalty is 200% of the total underpayment, capped at £20,000 per worker and with a minimum of £100 [11]. The penalty is halved if the employer pays the arrears and half the penalty within 14 days, so prompt action materially reduces the cost. Record-keeping obligations are strict: minimum wage records must be kept for at least six years, and a worker who asks to inspect their own records must be allowed to do so.
On top of the financial penalty, the government publicly names employers who underpay where total arrears exceed £500 [11]. The naming scheme has identified over 3,700 employers since it began, covering arrears of more than £49 million owed to over 526,000 workers [11]. For a consumer-facing business, the reputational damage of appearing on a public list often exceeds the fine itself.
The real cost of a minimum wage hire
The hourly rate is only part of the cost of employing someone at the minimum wage. On top of the wage, the employer pays employer National Insurance at 15% on earnings above the Secondary Threshold of £5,000 a year [12]. That rate rose from 13.8% to 15% on 6 April 2026, and the Secondary Threshold fell, so the employer cost of lower-paid staff rose at the same time as the wage floor.
A worked example shows the effect. A full-time worker on £12.71 an hour for 37.5 hours a week earns roughly £24,785 a year in gross pay. Employer National Insurance on that salary is around 15% of the amount above £5,000, or about £2,968 a year [12]. Automatic enrolment pension contributions add more on top, so the true employer cost of a minimum wage hire sits well above the headline hourly rate.
These combined costs mean minimum wage compliance is also a budgeting exercise, not just a payroll one. Employers can reduce the National Insurance element through reliefs such as the Employment Allowance, which offsets employer National Insurance for eligible businesses [6]. Software that embeds these calculations, including an HMRC-recognised payroll API, applies the correct rate and relief automatically, which matters most for the businesses running the tightest margins.
Work out minimum wage compliance
Before setting a rota or signing off a payrun, an employer can check that each worker clears the legal floor with the Moonworkers minimum wage calculator, which applies the 2026-27 rates across every age band.
To show weekly and annual equivalents
Not sure about the profile? Use the NI category as a shortcut
The rate depends on age and apprenticeship, not the NI letter; the letter just pre-fills the profile.
Rates from 1 April 2026
Enter the worker's age to get their exact band, weekly and annual equivalents.
Never worry about minimum wage compliance again
Moonworkers applies the right rate for every age and apprentice status automatically, flags underpayment before you submit, and keeps the 6-year records HMRC requires.
Conclusion
The National Living Wage is now £12.71 an hour, the pay floor meets its two-thirds of median earnings target, and the gap between the younger bands and the adult rate is closing year on year. For employers, the practical work is not knowing the headline figure but applying it correctly: counting the right hours, excluding the right elements from qualifying pay, watching deductions and salary sacrifice, and switching apprentices to their age rate on time.
The direction of travel is clear. With the eligibility age set to fall towards 18 over the coming years, more young workers will move onto the full adult rate, and the premium bands will narrow further. Combined with the higher employer National Insurance rate, the cost of lower-paid employment is rising on two fronts at once, which puts a premium on payroll systems that apply every rate and relief accurately on every payrun.
Frequently asked questions
What is the National Living Wage for the 2026-27 tax year?
The National Living Wage is £12.71 an hour for workers aged 21 and over from 1 April 2026, an increase of 50p or 4.1% on the previous rate [1]. The 18 to 20 rate is £10.85, and the 16 to 17 rate and apprentice rate are both £8.00. The rates change every 1 April.
What is the difference between the National Living Wage and the real Living Wage?
The National Living Wage is a legal minimum set by the government for workers aged 21 and over, set at £12.71 an hour, and every employer must pay it [2]. The real Living Wage is a voluntary rate of £13.45 across the UK and £14.80 in London, calculated independently on the cost of living, which employers can choose to pay but are not legally required to [3].
Do tips count towards the minimum wage?
No. Tips, gratuities and service charges never count towards minimum wage pay, however they reach the worker [9]. An employer cannot use tips to top a basic rate up to the legal minimum, and separate rules require 100% of tips to be passed on to workers in addition to their wages.
What penalty can an employer face for underpaying the minimum wage?
HMRC can issue a Notice of Underpayment requiring repayment of all arrears plus a penalty of 200% of the underpayment, capped at £20,000 per worker [11]. The penalty is halved if arrears and half the penalty are paid within 14 days. Employers with total arrears above £500 are also named publicly by the government.
