Minimum wage rise confirmed in Autumn Budget 2026: How much extra will you take home?

The National Living Wage is rising to £13.21 an hour from April 2027 following an announcement in the Autumn Budget, meaning millions of workers are set for a pay rise. But while an extra 49p an hour might sound like welcome news, the amount that actually makes it into your bank account could be smaller than you'd expect.

Chancellor John Healey has announced an increase of around 3.9% for workers aged 21 and over, while the minimum wage for 18 to 20-year-olds will rise to £11.27 an hour.

For someone working 37.5 hours a week on the National Living Wage, that means nearly £1,000 extra a year before deductions. However, with income tax thresholds still frozen, National Insurance contributions and potentially changes to benefits to consider, the amount you actually have available to spend may be considerably less.

So how much extra will you really get, and what should you look out for on your payslip?

What is the National Minimum Wage?

The National Minimum Wage is the legal minimum hourly rate that most workers in the UK must be paid, with different rates depending on their age and whether they're an apprentice.

The National Living Wage is the name given to the legal minimum wage for workers aged 21 and over. Despite the similar name, it's different from the voluntary real Living Wage, which is calculated based on living costs.

The legal rates usually change every April, and they apply to eligible part-time and zero-hours workers as well as full-time employees.

How much is minimum wage increasing in April 2027?

From 1 April 2027, the National Living Wage for workers aged 21 and over will increase from £12.71 to £13.21 an hour, a rise of 50p, or approximately 3.9%.

The National Minimum Wage for workers aged 18 to 20 will increase from £10.85 to £11.27 an hour, an additional 42p, also approximately 3.9%.

Because both age groups are receiving similar percentage increases, the gap between their hourly rates will remain significant. From April 2027, workers aged 18 to 20 will earn £1.94 less per hour than those aged 21 and over on the legal minimum wage.

The Government has previously committed to bringing the minimum wage for younger workers into line with the National Living Wage. However, the Low Pay Commission has been given flexibility over how quickly this happens, with consideration given to employment opportunities for younger workers and the wider labour market.

How much extra money will you earn on the new minimum wage?

How much more you earn will depend on how many hours you work each week.

For workers aged 21 and over receiving the new £13.21 hourly rate, the annual increases could look like this:

• 20 hours a week: An additional £520 a year, or approximately £43.33 a month before deductions.

• 30 hours a week: An additional £780 a year, or £65 a month before deductions.

• 35 hours a week: An additional £910 a year, or approximately £75.83 a month before deductions.

• 37.5 hours a week: An additional £975 a year, or £81.25 a month before deductions.

• 40 hours a week: An additional £1,040 a year, or approximately £86.67 a month before deductions.

These figures are based on the increase from £12.71 to £13.21 an hour and assume you work the same number of paid hours every week for 52 weeks.

And here's where things get a little more complicated. Just because your employer is paying you an additional £81.25 a month doesn't necessarily mean that's how much extra you'll have available to spend. Income tax, National Insurance, pension contributions and changes to means-tested benefits could all affect the amount that actually reaches your bank account.

Why might a minimum wage rise mean less extra money in your pocket?

When your wages increase, the amount you pay in income tax and National Insurance can increase too.

Most people currently receive a Personal Allowance of £12,570, which is the amount they can earn each year before paying income tax.

However, this threshold has been frozen since April 2021, despite wages and living costs continuing to rise.

When wages increase but tax thresholds remain the same, more of your earnings can become taxable. This is often referred to as fiscal drag.

It doesn't mean a pay rise automatically leaves you worse off, but it does mean you might not keep every extra pound you earn.

How much of your minimum wage increase could go towards tax?

Let's look at someone aged 21 or over, working 35 paid hours a week on the National Living Wage.

At the current rate of £12.71 an hour, they'd earn approximately £23,132 a year.

At the new rate of £13.21, their annual earnings would increase to approximately £24,042.

That's an additional £910 a year before deductions, equivalent to around £75.83 a month.

But not all of that extra money will make it into their bank account.

Assuming the standard Personal Allowance of £12,570 and basic-rate income tax rules in England, Wales or Northern Ireland, the additional earnings would mean approximately £182 more income tax over the year.

Employee National Insurance would also increase by around £72.80, assuming the main rate remains at 8% and the relevant thresholds stay unchanged.

That would leave approximately £655.20 extra a year, or £54.60 a month, before considering pension contributions or any changes to benefits.

So while the headline pay rise is worth £910 annually, around £255 of that could go towards additional income tax and National Insurance.

These are illustrative calculations rather than a personal take-home-pay forecast. Scottish income tax rules differ, and the actual amount will depend on your circumstances, including your tax code, pension contributions and any benefits you receive.

Could a pay rise affect your Universal Credit?

If you receive Universal Credit, a pay rise could also affect the support you receive.

Universal Credit is means-tested, which means the amount you're entitled to can change as your earnings increase.

For many claimants, Universal Credit is reduced by 55p for every additional £1 of earnings counted under the rules, although work allowances and individual circumstances affect the calculation.

So somebody receiving Universal Credit might find that their wages increase but their benefit payment falls at the same time.

That doesn't necessarily mean they're worse off overall, but it's important to understand the combined effect before assuming the full pay rise is available for additional spending.

If you're receiving Universal Credit, you can check how changes in earnings may affect your entitlement using an independent benefits calculator.

Will the minimum wage rise keep up with the cost of living?

That's another important question, because earning more money doesn't automatically mean you'll be able to afford more.

If your wages increase by around 3.9% but the cost of your regular shopping, transport, housing and energy rises at a similar rate, you may find that your household budget doesn't stretch much further.

This is why inflation matters when looking at wage increases.

For people managing finances on a tight budget, the difference between receiving more pounds and having greater spending power can be significant.

What should you do if your wages increase in April 2027?

There's no need to start changing your budget before the new rates take effect, but it's worth understanding how the increase could affect you.

When you receive your first payslip reflecting the new rate, check that your hourly pay is correct and that your employer has applied the appropriate minimum wage for your age.

It's also worth checking your tax code, particularly if you've changed jobs or your circumstances have changed, because an incorrect code could mean you're paying the wrong amount of tax.

If you receive Universal Credit or other means-tested support, check whether your increased earnings will affect your payments.

And before deciding what to do with any extra money, look at the actual increase in your take-home pay rather than the headline annual figure.

A pay rise can provide a little more breathing space, whether that's helping with everyday essentials, putting something aside for an unexpected expense or reducing money worries. Understanding how much extra you're genuinely receiving is the best place to start.