How the 2026 Minimum Wage Increase Will Affect Your Business

Minimum wage increases directly impacted businesses across the UK on April 1st, and the government are set to do it again this upcoming April 2026. If you were previously surprised and unprepared for the last living wage increase, then it’s critical that you read through this guide and use the time now to start preparing and adjusting your operations to seamlessly transition into that higher overhead in 2026.

What was the National Minimum Wage increase in 2025? 

The National Minimum Wage increased on April 1, 2025, to £12.21 per hour for those 21 and over. It also increased for the 18 to 20 bracket to £10 per hour, and the under 18 and apprentice rate has increased to £7.55. 

What are the Projected 2026 Wage Increases? 

The government’s current estimate for the national living wage increase for April 2026 is £12.71, with a range between £12.55 and £12.86. This wage increase is calculated based on median earnings, with the promise that the National Living Wage doesn’t drop below two thirds of the UK median earnings. This estimate means that you can personally predict what the upcoming minimum wage increases will mean for your overheads and allow you to space out price increases or make changes in advance. 

Note on the London Living Wage

It’s also crucial to pay attention to the London Living Wage. While not a legal requirement, top employers are matching and paying the London Living Wage of £14.80 per hour. If you operate in the city and want to attract top talent, paying this minimum wage is important, though again, not required. At a minimum, being aware of the London Living Wage is significant for planning purposes if you operate in or around London, due to the far higher cost of living. 

National Insurance Changes

Naturally, the minimum wage increase will increase your overheads and running costs. This is on top of the changes to Class 1 National Insurance Contributions. 

To start, the Secondary Threshold is dropping from £9,100 per year down to £5,000 per year, meaning more small businesses will need to pay National Insurance. The NIC rate will also increase from 13.8% to 15%, and the maximum Employment Allowance has also increased from £5,000 to £10,500, so you’ll be able to offset some of the cost if you’re prepared and file appropriately. 

How Will the Minimum Wage Increases Affect Your Business? 

Between wage and NIC increases, your overheads will increase. To prepare for higher overheads, you’ll want to do the following: 

Work with Professionals to Ensure Your Business Remains Compliant 

With both higher wages and NICs to contend with, it’s essential that you work with HR professionals to update your employment contracts. You may also need to work with an accountant to ensure that you can claim your maximum Employment Allowance, particularly as the previous £100,000 threshold was scrapped, meaning more businesses will be able to claim it. 

You can do this without hiring full-time team members, allowing you to budget better and prepare without further inflating your overhead costs. For example, the HR Dept can update all your employment contracts and handle any disputes if you need to streamline your team to accommodate the price increases during the transition. 

Prepare Price Increases in Advance

If you need to increase the prices of your services or goods, use the fact that you know the minimum wage will increase on April 1st as your deadline. You can then stagger price increases slowly, month by month, so that your customers don’t experience sticker shock and you can adapt your revenue to accommodate the increase in overheads. 

Automate to Get More 

Another way you can manage the increased overheads is to use automation and even AI to get more value out of your existing staff members. It’s important to choose small, clearly defined pay points in their workflows. This is when AI and other solutions are most effective, rather than as a one-size-fits-all solution. 

Adjust Your Operations 

Another option is to adjust your operations. For example, you can relocate from a large office to a smaller one and allow more employees to work from home on a rotating basis. This allows you to reduce your operational overheads without putting pressure on your workforce by trying to get them to do more than they can handle. 

Alternatively, you can also use the time to negotiate lower rates on your utilities, loans, and other expenses or even partnerships, allowing you to easily boost revenue and streamline your operations.