Millions of UK Workers See Pay Rise as New Minimum Wage and State Pension Rates Take Effect
Millions of workers and pensioners across the UK have seen their incomes rise from 1 April 2026, as the new National Living Wage of £12.71 per hour and a 4.8% increase in the state pension came into effect alongside a package of other benefit changes.
The increases, which form part of Labour's cost of living agenda, come at a time when households are facing rising energy costs driven by the Iran war, providing some relief for those on lower incomes.
Background
The National Living Wage has been increased annually since its introduction in 2016, with the government committed to raising it to two-thirds of median earnings. The state pension triple lock — which guarantees the pension rises by the highest of average earnings growth, inflation, or 2.5% — has been maintained by the Labour government, delivering a 4.8% increase based on average earnings growth of 4.8% in the May-July 2025 period.
Key Developments
The new National Living Wage for workers aged 21 and over rises from £12.21 to £12.71 per hour — a 4.1% increase that equates to nearly £25,000 annually for a full-time worker, an increase of almost £1,000 per year. Workers aged 18-20 see an 8.5% increase to £10.85 per hour, while 16-17 year olds and apprentices receive a 6% rise to £8.00 per hour.
The new state pension rises from £230.25 to £241.30 per week — approximately £12,548 per year, an increase of £575. The basic state pension for those who retired before April 2016 rises from £176.45 to £184.90 per week. Most other benefits linked to inflation increase by 3.8%, while Universal Credit standard allowances receive an above-inflation boost of 6.2% under the Universal Credit Act 2025.
The state pension age also begins a phased increase from 66 to 67 from April 2026, affecting individuals born between 6 April 1960 and 5 March 1961. MPs' basic salary rises by 5% to £98,599 annually — a decision that has drawn criticism from the Taxpayers' Alliance.
Why It Matters
The wage and pension increases provide meaningful financial relief for millions of households at a time of rising energy costs. However, economists note that the frozen personal allowance threshold of £12,570 means approximately 600,000 pensioners will become subject to income tax during 2026-27 as the state pension approaches the threshold. The Chancellor has assured that individuals whose sole income is the state pension will not face income tax liability.
What's Next
The government's next major fiscal event will be the Autumn Budget, where further decisions on benefits, tax thresholds, and cost of living support are expected. Read the full breakdown from Think Money.
