From April 2025, the UK national minimum wage will increase to £12.21 per hour, marking a 6.7% rise that affects over three million low-paid workers. This increase will mean that a full-time worker on minimum wage could see an annual income boost of around £1,400. While this wage rise provides welcome news for employees, it also presents significant considerations for employers.
We break down the new National Minimum Wage rates and why the UK government have decided to increase them.
What Are The National Minimum Wage & National Living Wage Rates For 2023/24
In the Autumn Budget, the government confirmed a rise in the NMW rates. These rates will be applicable from 1st April 2025. The new NMW and NLW rates are as follows:
| Rate from April 2025 | Increase (£) | Increase (%) | |
| National Living Wage Rate (21 and over) | £12.21 | £0.77 | 6.7 |
| 18-20 Year Old Rate | £10.00 | £1.40 | 16.3 |
| 16-17 Year Old Rate | £7.55 | £1.15 | 18 |
| Apprentice Rate | £7.55 | £1.15 | 18 |
| Accommodation Offset | £10.66 | £0.67 | 6.7 |
Impact on Younger Workers and Apprentices
The changes are particularly substantial for younger workers. For employees aged 18 to 20, the minimum wage will jump from £8.60 to £10 an hour, representing a 16% increase—the largest rise for this age group to date. For full-time employees in this bracket, this will translate into an estimated annual pay rise of £2,500. This aligns with the government’s longer-term goal of bringing younger workers’ pay closer to that of older age groups.
Apprentices will also see a pay increase, with the national minimum hourly wage for an 18-year-old apprentice set to rise by 18%, from £6.40 to £7.55 per hour. These changes are going to especially affect sectors such as construction, which may employ a large number of apprentices and younger workers.
The Broader Impact on Labour Costs and National Insurance
The government has also outlined plans to expand workers’ rights, which could further benefit lower-paid employees by adding up to £600 to their annual income. This comes alongside increases in National Insurance contributions for employers, which will further affect the cost of wages. As these changes will put additional strain on business finances, it’s essential for companies to budget accordingly and review their payroll obligations for 2025.
With wage rises come increased contributions for National Insurance, which will impact overall employment costs. Business owners may need to evaluate their budgets and adjust their forecasts to maintain a healthy cash flow while meeting these new requirements.
Potential Implications for Business Strategy and Investment
While the increase in minimum wage is a positive development for employees, it does bring challenges for employers. Business groups have expressed concern that these changes, paired with increased National Insurance contributions, could place additional strain on businesses, particularly small and medium-sized enterprises. The need to absorb these higher wage costs may lead some businesses to reassess investment plans or re-evaluate their hiring strategies.
For employers, this may be a time to explore efficiencies, assess staffing needs, or consider automation options in areas where wage costs could become a pressure point. Another option to consider is adjusting pricing structures to reflect the increased cost base, if feasible, as part of a broader strategy to manage the impact of these changes.
Preparing for the Minimum Wage Increase
To prepare for the upcoming changes, business owners should review their payroll systems, budget for the higher wage rates, and assess the impact of increased National Insurance costs. Additionally, businesses may want to communicate with employees in advance to set expectations around the changes and how they may affect staffing or operational strategies.
While the new rates aim to improve income security for employees, they also require careful planning and financial management on the part of employers. Speaking with an accountant or payroll specialist can help you navigate these changes effectively and ensure your business remains compliant with the updated regulations.
We hope this has outlined the new rates for the National Minimum Wage for 2025 onwards. If you’d like to know any further information on anything mentioned, or anything accounting related for that matter, please do not hesitate to get in contact with us at Nordens, where one of our trusted advisors would be happy talking you through your query.
