The latest Budget includes several key announcements for employers, particularly on the National Living Wage, National Minimum Wage, and National Insurance.

Although some of the changes will not take effect until April 2027, businesses should understand the potential impact on employment costs and start factoring these increases into their financial planning.

National Living Wage and National Minimum Wage 

The government has announced increases to the National Living Wage (NLW) and National Minimum Wage (NMW), taking effect from 1 April 2027.

The new hourly rates will be:

• £13.21 for the National Living Wage for employees aged 21 and over
• £11.27 for employees aged 18 to 20
• £8.31 for employees aged 16 to 17
• £8.31 for apprentices

The apprentice rate applies to apprentices under 19 and those aged 19 or over in the first year of their apprenticeship.

Employers should consider these increases as part of workforce and budget planning for 2027/28. Remember that an increase in hourly pay can also affect employment costs, including employer National Insurance contributions and workplace pension contributions.

Businesses may also want to review pay across their wider workforce. Where employees are paid slightly above the minimum rates, an increase in the National Living Wage can narrow the gap between pay grades and may put pressure on employers to review other salaries.

National Insurance rates

For 2026/27, the main Class 1 employee National Insurance rates are 8% and 2%, while the employer rate is 15%. These rates will remain unchanged for 2027/28.

The Secondary Threshold, which is the point at which employers generally become liable to pay employer National Insurance contributions on an individual employee’s earnings, is currently £5,000 per year.

This threshold will remain at £5,000 for 2027/28, and the government has announced that it will continue at this level until 5 April 2031.

While the employer National Insurance rate itself is not increasing, maintaining the threshold at £5,000 could still affect employment costs over time as salaries increase.

Changes to National Insurance limits

The government has also announced an increase to the Lower Earnings Limit from 2027/28.

The Lower Earnings Limit will be £6,916 per year, equivalent to £133 per week.

For people making voluntary National Insurance contributions, the Class 3 rate will increase to £19.05 per week for 2027/28.

The remaining National Insurance limits and thresholds will, as previously announced, be maintained at their current levels until 5 April 2031.

National Insurance relief for employers hiring veterans

There is some positive news for businesses employing qualifying veterans.

The government has extended employer National Insurance relief for businesses hiring qualifying veterans until 5 April 2028.

Under the relief, employers can continue to pay no employer NICs up to annual earnings of the Veterans Upper Secondary Threshold of £50,270. The relief is available for up to the first year of a qualifying veteran’s employment in a civilian role.

What should employers do now?

Although the new wage rates will not take effect until April 2027, employers should start considering them when preparing budgets and workforce plans for the 2027/28 financial year.

For businesses employing several people on or close to the National Living Wage or National Minimum Wage, even relatively small hourly increases can add significantly to the overall annual payroll cost.

Planning allows you to understand these additional costs and make informed decisions about recruitment, salaries, and future growth.

If you need advice about how changes to National Insurance, the National Living Wage or National Minimum Wage could affect your business, please get in touch with Watson Knipe on 01623 490 120 or email This email address is being protected from spambots. You need JavaScript enabled to view it..