The National Living Wage is set to rise by 3.9% to £13.20 an hour from April 2027, the government has announced ahead of Chancellor John Healey’s Budget on Wednesday 28 October. Workers aged 18 to 20 will get the same 3.9% rise, taking their minimum to £11.27, which ends two years of much faster youth increases and pauses Labour’s pledge to scrap the lower age bands in this Parliament.
For British retail, one of the biggest employers of minimum-wage staff, the figures land in the middle of an already crowded cost debate. Shop trade bodies broadly welcomed the slower pace for younger workers, but warned that wages, employer National Insurance and business rates are now being paid for out of the same squeezed margins. This article sets out the new rates, what they mean for a shop worker’s pay packet, what they cost a retailer per head, and what else in the Budget matters for the high street.
In short
- National Living Wage (21 and over) rises 49p, or 3.9%, from £12.71 to £13.20 an hour from April 2027.
- The 18 to 20 rate rises 42p, also 3.9%, from £10.85 to £11.27, after rises of 16.3% in 2025 and 8.5% in 2026.
- A full-time worker on 37.5 hours a week gains about £955 a year before tax; the employer’s bill, including National Insurance, rises by about £1,100 per head.
- The ACS welcomed a “more restrained approach”; the Fed warned of cumulative costs; the BRC wants relief on rates and employer NICs.
- The new rate stays 90p below the real Living Wage of £14.10 and £2.25 below the London rate of £15.45.
What has been announced for April 2027?
The headline change is a rise in the National Living Wage, the legal minimum for workers aged 21 and over, from £12.71 to £13.20 an hour. That is an increase of 49p, or 3.9%, and it takes effect in April 2027, in line with the usual start of the new pay year. The Times first reported the figures on the evening of Monday 26 October, and the BBC, the Financial Times and trade titles including Talking Retail and Better Retailing followed with the same numbers.
The Living Wage Foundation said on 27 October that “ahead of tomorrow’s Autumn Statement, the Government announced an increase in their National Living Wage to £13.20/hour for those aged 21+”. According to Talking Retail, the rates follow recommendations from the independent Low Pay Commission, the body that advises ministers on the minimum wage each autumn. The Chancellor is expected to set the figures out formally alongside the Budget on 28 October.
The rates by age band
The National Minimum Wage for 18 to 20 year olds will rise by 42p, from £10.85 to £11.27 an hour. That is the same 3.9% increase as the adult rate, so the youth rate stays at roughly 85% of the National Living Wage rather than closing the gap. Pre-Budget reports did not set out new figures for the 16 to 17 rate or the apprentice rate, and employers should check the official rates page on gov.uk once the full Budget documents are published.
The 3.9% rise compares with consumer price inflation of about 3.5% in the year to September, according to the Office for National Statistics. In other words, minimum-wage workers get a small real-terms rise, but nothing like the gains of 2024 and 2025, when the adult rate went up by 9.8% and 6.7% respectively.
How the figure was reached
The National Living Wage is set with a target of two thirds of median hourly earnings for workers aged 21 and over. In its April 2026 report, the Low Pay Commission gave a central estimate of £13.18 for April 2027, within an illustrative range of £13.02–£13.34, Personnel Today reported at the time. The confirmed £13.20 sits just above that central estimate.
The commission also warned in April that “earnings forecasts are inherently uncertain”, citing changes in economic conditions including the conflict in the Middle East. According to the Morning Advertiser, UKHospitality chief executive Allen Simpson said there had been “well placed rumours that the rate could be as high as 5.5%”, which helps explain why business groups treated 3.9% as something of a relief.
How much more will a shop worker earn?
For a full-time shop assistant on 37.5 hours a week, the new rate is worth £495.00 a week, up from £476.63. Over a year of 52 weeks that is £25,740 in gross pay, an increase of about £955 before tax and National Insurance. The figures below are shopappy calculations based on the reported hourly rates; actual pay depends on contracted hours, premiums and any pay above the legal minimum.
| Worker | Rate now (April 2026) | Rate from April 2027 | Weekly pay at 37.5 hours (2027) | Annual gross gain |
|---|---|---|---|---|
| Aged 21 and over (National Living Wage) | £12.71 | £13.20 | £495.00 | about £955 |
| Aged 18 to 20 | £10.85 | £11.27 | £422.63 | about £819 |
| Part-time adult, 20 hours a week | £12.71 | £13.20 | £264.00 | about £510 |
| Part-time adult, 16 hours a week | £12.71 | £13.20 | £211.20 | about £408 |
Retail relies heavily on part-time contracts, so the gain for many shop workers will be smaller in cash terms than the full-time figure suggests. A student working 16 hours a week on a weekend and evening rota would see roughly £8 a week more. How much of that reaches the worker after tax depends on whether their earnings cross the personal allowance and the National Insurance threshold.
The pay rise in context
The April 2027 increase is the smallest in percentage terms since 2021. The table below shows how the adult and youth rates have moved over the past four pay years, using published gov.uk rates for 2024 to 2026 and the reported 2027 figures.
| Pay year from April | 21 and over | Rise | 18 to 20 | Rise | Gap between the two |
|---|---|---|---|---|---|
| 2024 | £11.44 | 9.8% | £8.60 | 14.8% | £2.84 |
| 2025 | £12.21 | 6.7% | £10.00 | 16.3% | £2.21 |
| 2026 | £12.71 | 4.1% | £10.85 | 8.5% | £1.86 |
| 2027 | £13.20 | 3.9% | £11.27 | 3.9% | £1.93 |
The last column is the detail that has drawn most criticism from unions. Because both rates rise by the same percentage, the cash gap between a 20 year old and a 21 year old doing the same job widens slightly, from £1.86 to £1.93 an hour, for the first time since Labour took office.
Why has the youth rate rise slowed?
Labour’s 2024 manifesto promised to remove what it called “discriminatory age bands”, so that all adults would be entitled to the same minimum wage. The government made fast progress towards that goal: the BBC notes that pay for younger workers has risen by 26% since Labour returned to power. The April 2027 settlement stops that convergence, at least for now.
Business Secretary Jonathan Reynolds told the BBC that “the manifesto pledge on equalisation still applies but we were always clear it could happen over time”. He added: “Of course, you want not just good wages but good work. It is a balance of making sure the pressures on the labour market are taken into account.” The Morning Advertiser reported that Healey has acknowledged a possible trade-off between wage rates and employment, especially for younger workers.
The youth jobs argument
The decision follows months of lobbying from retail and hospitality over young people’s job prospects. The Morning Advertiser has cited official figures, reported in August, showing 981,000 people aged 16 to 24 were not in education, employment or training, equal to 13% of that age group. The British Retail Consortium has repeatedly linked rising employment costs to fewer entry-level roles, and says there are now nearly one million young people classed as NEET.
Unions see it differently. Andrea Egan, general secretary of Unison, told the BBC it was “deeply unfair” to keep paying different rates for the same job.
“Twenty year-old care workers, teaching assistants and security guards do the same work as their older colleagues,” she said. “They don’t pay less in the supermarket or at the petrol pump. They must be paid equally.”
What does it cost a retailer to employ one person?
The headline hourly rate is only part of what an employer pays. Since April 2025, employers have paid National Insurance at 15% on earnings above £5,000 a year per employee, and the British Retail Consortium says employer NICs paid by retailers have risen by more than £2bn over the past two years. Add holiday pay, pension contributions and sick pay, and the true cost per hour is well above the legal minimum.
Using the reported rates and the current employer NIC settings, shopappy estimates that the wage and National Insurance cost of one full-time adult worker on the minimum rises from about £27,752 to about £28,851 a year, an increase of roughly £1,100. Pension contributions, holiday cover and any pay premiums come on top. Large chains with tens of thousands of hourly staff have already responded to earlier rises by cutting roles: Britain’s biggest retailers removed close to 18,000 jobs in a year, as our report on UK retailers cutting 18,000 jobs after Labour’s tax rises set out.
| Annual cost per worker (estimate) | 2026/27 at £12.71 | 2027/28 at £13.20 | Change |
|---|---|---|---|
| Full-time adult, 37.5 hours: gross pay | £24,785 | £25,740 | +£955 |
| Full-time adult: employer NICs at 15% above £5,000 | £2,968 | £3,111 | +£143 |
| Full-time adult: pay plus employer NICs | £27,752 | £28,851 | +£1,099 |
| Part-time adult, 20 hours: pay plus employer NICs | £14,451 | £15,037 | +£586 |
| Full-time 18 to 20 year old: pay plus employer NICs | £23,581 | £24,523 | +£942 |
These are illustrative figures that assume the £5,000 secondary threshold and 15% rate stay unchanged in April 2027, and they exclude pension and holiday costs. Smaller employers can offset up to £10,500 of their annual employer NIC bill through the Employment Allowance, which means a small independent with a handful of staff may pay little or no employer National Insurance at all.
The real cost of a convenience worker
Trade bodies argue that the full cost of employment is rising much faster than the headline rate. Research published by the Scottish Grocers’ Federation in April 2026, reported by Better Retailing, found that the real cost of employing a convenience store worker in Scotland had reached £17.37 an hour after the April 2026 rise, once employer NICs, holiday pay and other costs were included. That was up 65p on a year earlier and almost double the £9.28 recorded in 2016.
The same SGF survey found that none of the respondents could increase staffing levels or hours because of rising costs, and 77% said wage increases would have a significant or substantial impact on business viability. “Scottish retailers support fair pay, but policymakers cannot ignore the real and rising business costs created by above-inflation increases to the National Living Wage,” SGF chief executive Pete Cheema said at the time.
A worked example for a small shop
Consider a hypothetical independent convenience store that rosters 300 hours of minimum-wage labour a week across its staff, or 15,600 hours a year. A 49p rise on every one of those hours adds about £7,644 to the annual wage bill. If all those hours sit above the NIC threshold and the shop has already used its Employment Allowance, the extra employer National Insurance adds roughly £1,150 more, taking the increase close to £8,800.
For a shop working on a thin net margin of 2% to 3% of sales, covering that cost would require roughly £300,000 to £440,000 of extra annual turnover at the same margin. That is why shop owners talk about cutting hours rather than cutting staff: it is the lever they control.
How have shop trade bodies reacted?
Retail’s main trade bodies have taken a measured line. None opposes a rise in the minimum wage outright, but all of them have used the moment to press the Chancellor on the other costs that sit alongside it.
Association of Convenience Stores
The ACS, which represents local shops, welcomed the slower pace. Chief executive Ed Woodall said: “Retailers have faced an unprecedented rise in employment costs over recent years and many have had no choice but to respond by reducing paid hours, delaying investment and becoming more cautious about recruitment.” He added: “Local shops will welcome a more restrained approach to minimum wage increases, helping to protect jobs, maintain opportunities for younger workers and support the government’s growth ambitions.”
Woodall also gave evidence to the Commons Business, Innovation, Science and Trade Committee on 27 October, according to Talking Retail, telling MPs that “the cost of wages has gone up, meaning that we’re increasingly paying for fewer hours”. He said shop owners were taking on more shifts themselves, leaving less time to run the business, and that business rates had risen by 79% across the sector since 2024. The trade body’s own figures, covered in our look at the ACS Local Shop Report 2026 and its doubling rates bill, show how those costs have built up.
Federation of Independent Retailers
The Fed, which represents independent newsagents and convenience stores, was more cautious. National president Hemanshu Patel said: “Independent retailers want to pay their staff fairly, but the Government must recognise that every increase in employment costs has to be paid for by a business already facing significant financial pressures.”
“For many independent retailers, these are not simply figures on a spreadsheet,” Patel added. “They affect decisions about whether they can afford to take on new staff, offer hours to younger workers or maintain their existing workforce.” He warned that without proper consideration of cumulative costs, the government “risks making it harder for young people to find work and for independent retailers to continue providing jobs in their local communities”.
British Retail Consortium
The BRC has focused its Budget campaign on taxes rather than the wage rate. It wants the Chancellor to raise the employer National Insurance threshold from £5,000 to £6,000, freeze the inflation-linked rise in business rates and exempt shops from the new higher multiplier for large properties. Chief executive Helen Dickinson said the Chancellor “must address the barrage of costs and taxes currently raining down on the industry”, citing business rates and employer NICs, which she said are up by over £2bn in the last two years.
Hospitality groups, which share many high street sites with retailers, were sharper. UKHospitality chair Kate Nicholls told the Times that the industry welcomed “stepping off the accelerator” on the youth rate, but described a “double whammy” of wage rises and employer NICs. “It is going to hurt the hospitality sector and its ability to create jobs and tackle the Neets crisis,” she said.
How does £13.20 compare with the real Living Wage?
The government’s National Living Wage is a legal minimum. The real Living Wage, set each year by the Living Wage Foundation and paid voluntarily by accredited employers, is calculated from the cost of living. The foundation announced its 2026/27 rates on 15 October: £14.10 an hour across the UK and £15.45 in London, according to Money Saving Expert and payroll specialists.
| Rate | Hourly | Full-time annual (37.5 hours, 52 weeks) | Who sets it | Legal requirement? |
|---|---|---|---|---|
| National Living Wage from April 2027 | £13.20 | £25,740 | Government, on Low Pay Commission advice | Yes, for workers 21 and over |
| Real Living Wage (UK) | £14.10 | £27,495 | Living Wage Foundation | No, voluntary accreditation |
| London Living Wage | £15.45 | £30,128 | Living Wage Foundation | No, voluntary accreditation |
| National Minimum Wage, 18 to 20, from April 2027 | £11.27 | £21,977 | Government, on Low Pay Commission advice | Yes |
The foundation said that, compared with the National Living Wage rates coming into effect in April 2027, a full-time worker on the legal minimum will earn “over £1,700 less” than someone on the real Living Wage across the UK, and “over £4,300 less” in London. The real Living Wage also applies from age 18, with no lower youth band.
Several large UK retailers already pay at or above the real Living Wage for some or all store staff, and many supermarkets set their own hourly rates above the legal minimum. For those employers, the April 2027 legal rise matters less than the pressure to keep their own pay rates ahead of competitors for staff, which can push the effective floor higher than £13.20 in tight local labour markets.
Will shoppers pay more as a result?
Labour is the single biggest controllable cost for most shops after the goods they sell, so wage rises tend to show up in prices over time. The BRC’s latest Shop Price Monitor showed shop price inflation of 2.1% in October, the highest since February 2024, with food prices up 2.9% on a year earlier. Our report on UK shop price inflation hitting 2.1% before the Budget covers which categories are rising fastest.
Public anxiety about prices is high. According to Opinium polling of more than 2,000 UK adults commissioned by the BRC and published on Budget day, 83% are concerned about rising food prices and 82% about inflation. The BRC says retail faces £41bn in business taxes in 2026/27, a 20% increase in two years, and argues that any further rise in retail taxes would “inevitably push prices even higher for households”.
The government’s counter-measures
Ahead of the Budget the government announced a package of what Healey called “everyday fixes”, including removing import tariffs on 100 food items such as baked beans, garlic, gherkins, citrus marmalades and plant-based drinks. The government said that, combined with tariff suspensions introduced in June, the measure could save households up to £21 a year, or about 40p a week, the BBC reported.
“None of this is going to change the world,” Healey told the BBC’s Newscast, adding that he wanted to act where measures could help “around the margins”. Better Retailing noted that the extent to which tariff savings reach wholesale and shelf prices “remains unclear”. For shoppers, the honest answer is that a 3.9% wage rise spread across a shop’s cost base is unlikely on its own to move prices sharply, but it adds to a stack of costs that retailers say they can no longer absorb.
What else in the Budget matters for retailers?
The minimum wage is one of several levers the Chancellor is pulling on 28 October that affect shops. Business rates are the issue trade bodies rank highest. Without action, the BRC says, business rates will rise by 3.5% in April 2027 in line with September’s CPI, adding about £250m to retail’s bill. Retail already pays about a fifth of all UK business rates.
Independent retailers have their own list. The British Independent Retailers Association has called for the restoration of the 75% retail rates discount and a doubling of the Employment Allowance, as set out in our earlier piece on Bira’s six asks for the 28 October Budget. The ACS wants the small business rates relief threshold raised from £12,000 to £18,000 of rateable value, so that more small shops pay no rates at all.
Employment law changes arriving alongside
The wage rise also lands alongside changes from the Employment Rights Act that are already in force or about to be. From 30 October 2026, employers become liable for third-party harassment of staff, including abuse by customers, unless they have taken all reasonable steps to prevent it, a significant change for shops dealing with rising retail crime. Our guide to the Employment Rights Act changes for shops from October explains what “all reasonable steps” is likely to mean in practice.
The government has also said it will roll out hundreds of additional Post Office drop boxes to make sending parcels easier, one of the pre-Budget “everyday fixes” with a direct link to online sellers. Fuel duty is expected to stay frozen, with the 5p cut retained, according to the BBC, which matters for delivery costs.
What should shop owners do before April 2027?
April is five months away, which gives employers time to plan rather than react. A sensible order of work is to start with the people closest to the shop floor, then work upwards, because the new minimum can push junior supervisors’ pay uncomfortably close to the staff they manage.
- Audit every hourly rate. List each employee’s age, hourly rate and contracted hours, and flag anyone who will fall below £13.20 (21 and over) or £11.27 (18 to 20) from the first pay period starting on or after 1 April 2027.
- Watch birthdays. A worker turning 21 moves from £11.27 to £13.20 overnight, a jump of £1.93 an hour; rotas and budgets need to anticipate this.
- Check deductions and uniforms. Deductions for uniforms, tills shortages or unpaid time spent opening and closing can push pay below the legal minimum even when the headline rate is correct, and HMRC enforces this.
- Review pay differentials. Decide whether supervisors and key holders keep their premium over the new floor; narrowing gaps can make promotion less attractive.
- Model hours, not just rates. Use footfall and till data to work out where hours can be trimmed without hurting service, so that quiet hours are cut before busy ones.
- Claim the Employment Allowance. Eligible small employers can reduce their employer NIC bill by up to £10,500 a year; check it is being claimed through payroll.
Underpaying the minimum wage carries real penalties. HMRC can order arrears to be paid at current rates, impose fines of up to 200% of the arrears, and the Department for Business and Trade regularly publishes the names of employers that have underpaid. For a small shop, a payroll mistake on a handful of staff can be more expensive than the rise itself.
What happens next?
The Chancellor is expected to confirm the rates in his Budget statement, and the government will lay regulations to bring them into force from April 2027. The Low Pay Commission’s full recommendations report is usually published alongside the announcement, setting out the evidence behind the figures and any recommendation on the 16 to 17 and apprentice rates.
The bigger question for retail is what comes after. The government has said equalisation of the youth rate “still applies” over time, which means the gap between the 18 to 20 rate and the adult rate could start closing again in 2028 or later. Business groups will also be watching whether the Budget moves on business rates or employer National Insurance, because those decisions will determine whether April 2027 feels like a manageable rise or one more cost in a long line.
For shop workers, the rise is real but modest: about £18 a week for a full-timer, slightly more than inflation. For shop owners, the message from their trade bodies is consistent. Fair pay is not the argument; it is the combined bill for wages, National Insurance, rates and energy that will decide how many hours, and how many jobs, Britain’s shops can offer next year.
Frequently asked questions
What will the National Living Wage be in April 2027?
The National Living Wage for workers aged 21 and over is set to rise from £12.71 to £13.20 an hour from April 2027, an increase of 49p or 3.9%. The government announced the figure ahead of the 28 October 2026 Budget.
What is the minimum wage for 18 to 20 year olds from April 2027?
The National Minimum Wage for 18 to 20 year olds is set to rise from £10.85 to £11.27 an hour, also a 3.9% rise. This is much smaller than the 16.3% rise in April 2025 and the 8.5% rise in April 2026.
How much extra will a full-time worker on the minimum wage get?
A worker aged 21 or over on 37.5 hours a week will earn £495.00 a week, up from £476.63. That is about £955 a year more before tax and National Insurance, based on 52 weeks.
Why is the youth rate not catching up with the adult rate?
The government has slowed youth rate rises after business groups warned about the cost of hiring young people. Business Secretary Jonathan Reynolds told the BBC the manifesto pledge to equalise rates “still applies” but could happen over time.
How much will the rise cost a shop per employee?
On shopappy estimates, the wage and employer National Insurance cost of one full-time adult on the minimum rises by about £1,100 a year, from about £27,752 to £28,851. Pension and holiday costs come on top, and small employers may offset NICs with the £10,500 Employment Allowance.
Is the National Living Wage the same as the real Living Wage?
No. The National Living Wage is the legal minimum set by the government. The real Living Wage is a voluntary rate set by the Living Wage Foundation, currently £14.10 across the UK and £15.45 in London, and it applies from age 18.
Will the minimum wage rise push up shop prices?
Retailers say higher employment costs add to price pressures, and the BRC’s October Shop Price Monitor showed inflation of 2.1%, with food up 2.9%. The 3.9% wage rise alone is unlikely to move prices sharply, but trade bodies say the combined burden of wages, NICs and business rates is feeding through.
When do employers have to pay the new rates?
The new rates apply from April 2027. Employers must pay at least the new rate from the start of the first pay reference period beginning on or after the date the rates take effect, so payroll should be updated before then.