Keeping up with the latest National Minimum Wage (NMW) and National Living Wage (NLW) rates is essential for UK employers. In April 2025, the government introduced significant increases, affecting millions of workers and businesses alike. As of 2026/27, over 2 million workers benefit from the NLW, underscoring the importance of compliance to avoid penalties and support fair pay.
| Age Group / Category | Hourly Rate (£) 2026/27 |
|---|---|
| National Living Wage (23+ years) | £11.44 |
| 21-22 years | £10.18 |
| 18-20 years | £7.49 |
| Under 18 years | £5.28 |
| Apprentices (under 19 or first year) | £5.28 |
| Accommodation Offset | £9.50 (max per day) |
What is the National Minimum Wage and National Living Wage?
The National Minimum Wage and National Living Wage are legal minimum hourly pay rates that employers must adhere to when paying workers in the UK. Introduced in 1999, the NMW applies to workers aged under 23, while the NLW is the higher rate set for workers aged 23 and over. These wages ensure that employees receive a fair base pay for their work.
It is important for small business owners to understand which rates apply to their employees, as failure to comply can result in enforcement action by HMRC, including fines and back pay orders. The rates are reviewed annually by the Low Pay Commission and typically increase each April.
2026/27 National Minimum Wage and National Living Wage Rates
For the tax year starting 6 April 2025, the government announced the following hourly rates:
- National Living Wage (23+ years): £11.44
- 21-22 years: £10.18
- 18-20 years: £7.49
- Under 18 years: £5.28
- Apprentice rate: £5.28
These rates are mandatory for all employers in the UK, regardless of company size or sector. Note that the apprentice rate applies to those under 19 or in their first year of apprenticeship, and once an apprentice turns 19 and completes their first year, the appropriate age-based rate applies.
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Accommodation Offset and Other Allowable Deductions
If you provide workers with accommodation as part of their employment package, you may be able to deduct a fixed amount from their pay when calculating minimum wage compliance. This is known as the accommodation offset.
For 2026/26, the maximum accommodation offset is set at £9.50 per day. This amount can be deducted from the wage before checking if the worker has been paid at least the minimum wage. However, you must have a written agreement with the employee about the accommodation and the deduction.
Key points about the accommodation offset:
- The offset can only be used for accommodation provided as part of the job.
- It cannot be more than £9.50 per day.
- The deduction must be agreed in writing with the employee.
- Deductions for food or other expenses must be calculated separately and cannot be included in the accommodation offset.
Your Obligations as an Employer
Employers are legally required to pay at least the National Minimum Wage or National Living Wage to all eligible workers. This includes full-time, part-time, casual workers, agency workers, and some trainees.
To comply, employers should:
- Identify the correct minimum wage rate based on the worker’s age and status.
- Calculate pay carefully, including regular hours, overtime, bonuses, and non-cash benefits.
- Keep accurate payroll records for at least three years.
- Provide pay slips that clearly show hours worked and pay rates.
- Ensure any deductions comply with the law and are agreed with the worker.
Failing to meet these obligations can lead to HMRC investigations and enforcement. If underpayment is found, employers must repay arrears to workers and may face penalties.
Penalties for Underpaying the Minimum Wage
HMRC enforces minimum wage compliance and takes underpayment seriously. If you are found to have paid less than the NMW or NLW, you will be required to:
- Repay the full amount owed to your workers, including any arrears.
- Pay a financial penalty of up to 200% of the total underpayment, capped at £20,000 per worker.
- Face public naming on HMRC’s website as a non-compliant employer.
To avoid penalties, it is advisable to regularly review your payroll processes and stay updated with changes to minimum wage rates. You can find detailed guidance on GOV.UK and contact HMRC’s National Minimum Wage helpline if you have questions.
How to Check if Your Pay Rates Are Compliant
Ensuring your payroll meets the minimum wage requirements involves several practical steps:
- Determine the worker's age and employment status: This affects the applicable rate.
- Calculate total pay: Include hourly wages, bonuses, and non-cash payments.
- Divide pay by hours worked: Use actual hours worked, including overtime.
- Consider accommodation offset: Deduct if applicable and agreed upon.
- Compare to the relevant NMW or NLW rate: Ensure pay per hour is not below the statutory rate.
Businesses can also use HMRC’s online minimum wage calculator for additional help. Regular checks are especially important if you have seasonal workers, apprentices, or workers approaching different age brackets.
- The National Living Wage for 23+ is £11.44 per hour from April 2026.
- Different rates apply for younger workers and apprentices.
- Employers can deduct up to £9.50 per day for accommodation with written agreement.
- Non-compliance can lead to repayment of arrears and heavy penalties.
- Keep detailed payroll records and regularly review pay rates to stay compliant.
Who is entitled to the National Living Wage?
Workers aged 23 and over are entitled to the National Living Wage, which is higher than the National Minimum Wage for younger workers. This applies to employees, casual workers, and some agency workers.
Can I deduct rent for accommodation from wages?
Yes, but only up to a maximum of £9.50 per day as the accommodation offset, and only if you have a written agreement with your employee. This deduction counts towards compliance with the minimum wage.
What happens if I pay below the minimum wage?
HMRC can require you to repay arrears to workers and impose a penalty of up to 200% of the underpayment (capped at £20,000 per worker). You may also be publicly named as a non-compliant employer.
Official Sources
* GOV.UK: Set up a business · * HMRC: Income Tax rates · * HMRC: Corporation Tax · * HMRC: VAT registration