London employers: minimum wage rises to £13.21 in April

The National Living Wage for workers aged 21 and over will rise from £12.71 to £13.21 an hour on 1 April 2027. The government accepted the Low Pay Commission's recommendations in full at the Budget on 28 October. Every other minimum rate rises by the same 3.9 per cent.

The new rates

• Aged 21 and over: £13.21, up 50p.

• Aged 18 to 20: £11.27, up 42p.

• Aged 16 to 17, and the apprentice rate: £8.31, up 31p.

• Accommodation offset: £11.53 a day, up 43p.

The government's announcement has the full table. These will be the legal minimums from 1 April 2027. The London Living Wage is a separate, voluntary benchmark that employers can choose to sign up to.

What the rise costs a small employer

Illustration, not a real client. A bakery in Hackney employs four people aged 21 or over on the minimum wage, each working 30 hours a week.

• Pay: 50p for 30 hours over 52 weeks is £780 a year per person, or £3,120 for all four.

• Pension: if they are in the workplace pension, the employer pays at least 3 per cent of qualifying earnings, so about £23 more per person at today's earnings band.

• Employer National Insurance: 15 per cent above £96 a week, which would add £117 per person on the rise. But if these are its only staff, the bakery's whole employer National Insurance bill on the new wages comes to about £9,370 a year, and the £10,500 Employment Allowance covers all of it.

So for this bakery the real cost of the rise is the wage itself plus pension: about £3,210 a year. A business that has already used up its Employment Allowance on other staff would pay about £470 more in National Insurance. A company whose only employee is its sole director cannot claim the allowance at all.

Younger staff cost less in National Insurance

For employees under 21, and apprentices under 25, the employer pays no National Insurance on earnings up to £967 a week. So for an 18 to 20-year-old moving to £11.27, the rise costs the extra wage and any pension contribution, with no employer National Insurance on top.

The thresholds are not moving

The Budget documents keep employer National Insurance at 15 per cent above £96 a week for 2027 to 2028, and the Employment Allowance at £10,500. With the £96 threshold standing still, the employer National Insurance on a minimum wage worker rises in April 2027 even though the rate does not.

Before April

List your staff by age band and flag anyone who moves into a higher band during the year. Then look at your prices: if you charge for staff time, the new rate belongs in next year's price list now, not in April. Our guide to the April 2027 minimum wage rates works through the cost per worker in more detail. The date to plan around is 1 April 2027.

About the author

Harvey Dhillon is Founder and CEO of Zmartly, an accountancy firm for small businesses. He grew up in West London and began his career in finance at Barclays, in investment banking and wealth management, before going full-time on Zmartly in 2020.

Featured photo by Faheem Ahamad on Pexels.