Today Is the Day: National Living Wage £12.71 Is Now Law

From this morning, 1 April 2026, the National Living Wage for workers aged 21 and over has risen to £12.71 per hour. If you have hourly-paid staff and haven't already updated your payroll, you are breaking the law right now.

HMRC's enforcement response is automatic. The penalty: 200% of the total underpayment, up to £20,000 per worker, plus mandatory repayment of all arrears. And HMRC publishes a "naming and shaming" register — your business name, publicly listed alongside the fine amount.

This guide covers exactly what's changed, the hidden risks most employers miss, and the single most important check you need to make today.

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What Changed on 1 April 2026?

The Low Pay Commission confirmed new National Living Wage and National Minimum Wage rates effective from today:

Age Group	Previous Rate	New Rate from 1 April 2026
21 and over (NLW)	£11.44/hr	£12.71/hr
18–20	£8.60/hr	£10.00/hr
Under 18	£6.40/hr	£7.55/hr
Apprentices	£6.40/hr	£7.55/hr

The increase to £12.71 represents a 6.7% rise for workers aged 21+. For a full-time employee working 37.5 hours per week, that's an additional £1,493 per year in wage costs.

The 18–20 rate increase — to £10.00/hr — is the largest proportional increase in the NMW's history. If you employ workers in this age bracket, the jump is significant.

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Why HMRC Takes This Seriously

Last year, HMRC investigated 750 employers and recovered £4.2 million in underpayments, with an average fine of £5,600 per business. The naming and shaming register now runs multiple cycles per year.

Here's what that looks like in practice: A café owner in the 2025 naming round was found to have underpaid 12 workers by a combined total of £18,000. The penalty added another £36,000 on top — a total liability of £54,000 for what started as a 20p/hour mistake.

For businesses with 10+ hourly workers, a payroll error of just 15p per hour — missed across a full workforce — accumulates to tens of thousands of pounds in liability before HMRC ever contacts you.

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The Hidden Risks Most Employers Miss

Paying £12.71 on paper is not enough. HMRC calculates effective hourly pay — meaning deductions from wages count against the minimum wage threshold.

1. Uniform and PPE Deductions If your business requires a specific uniform or PPE and deducts the cost from wages, this reduces the worker's effective hourly rate. If the deduction pushes pay below £12.71/hr, you're in breach — even if the headline rate is correct.

2. Tips and Service Charges Since the Worker Protection Act, tips cannot be used to top up basic pay to the minimum wage. If you're relying on service charge distributions to supplement hourly rates, check your structure urgently.

3. Salary Sacrifice Arrangements Some employee benefit schemes reduce gross pay. If a salary sacrifice arrangement brings effective hourly pay below £12.71, the scheme must be adjusted.

4. On-Call and Waiting Time Workers who are required to be available (e.g., security staff, care workers on sleep-in shifts) must receive at least the NLW for all qualifying time. HMRC has specifically targeted the care sector on sleep-in rates in recent years.

5. Trial Periods A common mistake: putting workers through a "trial period" at a lower rate. There is no legal provision for paying below the minimum wage during a trial. If they're working, they must be paid at least £12.71/hr.

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The 18–20 Rate: Don't Overlook It

The jump to £10.00/hr for 18–20 year olds is worth particular attention. In sectors like hospitality, retail, and warehousing, this age group makes up a significant portion of the workforce. The rate closes the gap with the full NLW considerably — and is likely to reach parity within the next three years.

If you have staff in this age bracket and haven't already reviewed their rates, do it today.

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What You Need to Do Right Now

1. Check your payroll system Confirm your payroll software has been updated to reflect the new rates. If you use a payroll bureau, contact them today to confirm the change has been applied.

2. Review effective hourly pay Don't just check the headline rate. Factor in deductions, salary sacrifice arrangements, and tip distributions to confirm effective hourly pay clears £12.71.

3. Check the 18–20 band Separately confirm rates for any employees aged 18–20 — their rate has increased to £10.00/hr.

4. Update pay slips Pay slips from the next pay period must reflect the new rates. Errors on pay slips are themselves a compliance risk.

5. Document the change Keep a record of when and how you updated rates. If HMRC investigates, demonstrating a proactive compliance response matters.

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ComplianceAlert Monitors NMW — Including Future Changes

The National Living Wage changes every April. In addition to the rate, HMRC updates enforcement guidance, changes the qualifying age thresholds (as happened when 21-24 merged into 21+), and adjusts the naming register criteria.

ComplianceAlert monitors all of this automatically and sends plain-English alerts when anything changes that affects your business. No legal jargon. No scanning gov.uk for updates. Just a clear notification before enforcement begins.

Not sure if your payroll is NLW-compliant right now? Take our free 3-minute Compliance Score quiz — 20 questions, instant results, no sign-up required:

👉 compliancealert.co.uk/compliance-score

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The Fair Work Agency: What Comes Next

The Fair Work Agency launches on 7 April 2026 — six days from today. It merges HMRC's NMW enforcement team with the Gangmasters and Labour Abuse Authority and the Employment Agency Standards Inspectorate.

Unlike the current reactive system (where HMRC only investigates following a complaint), the Fair Work Agency can conduct proactive, unannounced inspections. It will audit wage records, sick pay, and holiday pay simultaneously.

The timing is not a coincidence. The FWA launches days after the NLW increase — its first enforcement targets will almost certainly be businesses that failed to update pay correctly on 1 April.

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What Happens If You Get It Wrong?

Financial penalties:

• Repayment of all underpaid amounts (arrears to every affected worker)
• Civil penalty of 200% of underpayment, up to £20,000 per worker
• This is uncapped for the total bill — 20 workers underpaid = up to £400,000 in penalties

Reputational damage:

• HMRC publishes named businesses in the quarterly naming register
• This is picked up by local press and trade publications
• There is no mechanism to be removed from the register after publication

Employment tribunal risk:

• Workers can bring separate tribunal claims for unlawful deduction of wages
• They do not need to go through HMRC — the tribunal route is direct and increasingly common

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FAQ

Do I need to put anything in writing to employees about the rate change? You don't need to issue formal notification just for a statutory rate increase, but updating employment contracts or pay slips to reflect the new rate is good practice.

Does the NLW apply to part-time workers? Yes. The minimum wage is per-hour, not per-week. It applies to every hourly-paid worker aged 21+ regardless of hours worked.

What if I can't afford to pay the new rate? There is no exemption. All businesses, regardless of size, must comply from 1 April. If cash flow is a concern, ACAS has guidance on wage-related hardship discussions — but the legal obligation remains.

Can apprentices be paid less? Yes, but only for the first year of an apprenticeship or if the apprentice is under 19. After the first year, anyone aged 19+ must receive at least the standard NMW for their age group.

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Key Takeaways

• £12.71/hr for 21+ workers is the legal minimum from today
• £10.00/hr for 18–20 year olds — the biggest proportional increase in NMW history
• HMRC penalty: 200% of underpayment, up to £20,000 per worker, plus arrears
• Hidden risks: uniform deductions, tips, salary sacrifice, on-call time — all affect effective pay
• The Fair Work Agency launches April 7 and can conduct proactive inspections

The single best thing you can do today: Confirm your payroll has updated — then run your free compliance check.

👉 Take the free Compliance Score quiz at compliancealert.co.uk/compliance-score — instant results, no card required.

Or start your free 7-day trial at compliancealert.co.uk — monitor NMW, FWA enforcement, SSP, and every other employment law change in one place.

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