Category: Perpetual Blog

It feels like only yesterday we were toastying the New Year, yet here we are in mid-March, and the "April transition" is staring us right in the face. If you’re running a small business in the UK, your to-do list is probably already a mile long. But there’s one specific number that needs to move to the very top: £12.71.

From April 2026, the National Living Wage (NLW) is officially climbing to £12.71 per hour for those aged 21 and over. While a pay rise is great news for workers, we know that for business owners, it’s another overhead to manage in an already tight economy.

At Perpetual Accountancy, we’re all about making the "scary stuff" manageable. So, let’s break down what’s changing, who it affects, and what you should do now to stay compliant.

The New Rates: The Nitty-Gritty

It’s not just the over-21s getting a bump. The government is continuing its push to close the gap between age groups, which means some of your younger team members might be seeing an even larger percentage increase than your senior staff.

Here is the breakdown of what you need to be paying from the first full pay period in April 2026:

Why the 18-20 bracket matters

You’ll notice that while the headline 4.1% increase for the NLW is significant, the 18-20 age group is seeing a massive 8.5% jump. The government’s long-term goal is to eventually have a single adult rate, removing the "experience discount" that many businesses have traditionally relied on when hiring younger staff. If your workforce is primarily made up of young adults: common in hospitality and retail: this is likely where you’ll feel the pinch the most.

Who is feeling the heat?

While every business with employees will feel this, certain sectors are on the front lines. If you operate in one of these industries, now is the time to sit down with your small business accountant and look at the numbers.

1. Hair & Beauty

In the world of salons and barbershops, your people are your product. Between chair rentals, rising product costs, and now a higher wage bill, the margins are getting thinner. If you have apprentices or junior stylists, that 6% to 8.5% increase needs to be factored into your treatment pricing immediately.

2. Hospitality & Retail

Whether it’s a boutique shop or a local cafe, these sectors are high-employment and often operate on razor-thin margins. A 4.1% increase in the wage bill doesn't just mean 50p extra an hour; it means higher National Insurance contributions and higher pension auto-enrolment costs.

3. Construction & CIS

For those in the trades, it’s not just about your direct PAYE employees. While subcontractors under the Construction Industry Scheme (CIS) set their own rates, a rise in the National Living Wage often pushes up the "market rate" for general labourers. If the minimum wage goes up, everyone else usually wants a bump to maintain their pay gap.

The "Hidden" Costs of a Wage Hike

When you see "£12.71," it’s easy to just calculate the hourly difference. But as your friendly cloud accounting experts, we have to remind you that the real cost is higher.

When wages go up:

• Employer National Insurance (NI): Your NI contributions are calculated as a percentage of gross pay. Higher pay = higher NI.
• Pension Contributions: If you’re enrolled in a workplace pension scheme, your percentage contribution now applies to a larger base salary.
• Overtime and Holiday Pay: These are all calculated based on the hourly rate. That "time and a half" Sunday shift just got a lot more expensive.

For a full-time worker on the NLW (37.5 hours a week), you’re looking at an extra £977 per year in gross wages alone. Add in the extras, and you’re easily clearing £1,100 per employee.

How to Prepare (Quick Checklist)

You don’t want to be recalculating pay rates at the last minute. Here’s the practical stuff to do now:

• Update pay rates (and check salaried staff still meet minimum hourly rates once hours are considered).
• Review rotas and overtime so you understand the true cost increase.
• Budget for on-costs like Employer NI, pension contributions, and higher holiday pay.
• Run a simple cash flow forecast for the next 3–6 months, so you can make calm decisions early.

If you want, we can review your payroll setup and numbers using the payroll solution that suits your business (cloud or otherwise).

Top Tips for Small Business Owners

1. Review pricing and margins: If wage costs rise by 4–8%, you may need to adjust pricing or hours to protect margin.
2. Tighten timekeeping and overtime controls: Small changes here can make a big difference.
3. Check contracts and pay policies: Make sure pay, breaks, and overtime rules are clear and followed.
4. Keep clean digital records (MTD-ready): Good records make it easier to spot cost creep and stay compliant.

Stay Compliant (and Avoid Penalties)

HMRC penalties for underpaying minimum wage can be significant, even if it’s accidental. The safest approach is to check your rates, document changes, and make sure payroll calculations are correct each pay run.

Working with a dedicated small business accountant helps you stay on top of it and avoid nasty surprises.

Let’s Chat

We know that a 4.1% increase in your wage bill can feel like a lot to take in, especially with everything else going on in the world. But you don’t have to figure it out alone.

Whether you want a quick review of your payroll setup, a deep dive into cash flow, or just reassurance you’re fully compliant (and claiming what you should), we’re here to help.

At Perpetual Accountancy, we pride ourselves on being more than just people who "do the books." We’re your partners in growth. Let’s make sure April 2026 is a springboard for your business, not a stumbling block.

Ready to get your finances in shape?
Contact us today for a casual chat about how we can support your business through the April transition and beyond. You can also explore our full range of accounting services here.

Note: The information in this post is based on current government announcements for the 2026/27 tax year. Rates and regulations can change, so always check with your accountant for the most up-to-date advice.