The Low Pay Commission’s central April 2027 projection would add £1,124.24 a year to wages and employer National Insurance for an illustrative full-time adult employee where no allowance remains. With enough Employment Allowance available, the same wage increase costs £977.60 before pensions and other effects.
The projected £13.18 hourly rate is not a decision. Official rates, projections and announcements were checked on 11 September 2026; the calculations are planning scenarios.
Budget against a range, not a settled rate
The LPC’s April 2026 consultation letter projects £13.02 to £13.34 for April 2027, with £13.18 centrally. These are estimates of the rate needed to maintain the benchmark of two-thirds of median hourly earnings. They can change with earnings data, forecasts and the Commission’s judgement.
The confirmed rates from April 2026 are £12.71 for workers aged 21 and over, £10.85 for ages 18 to 20, and £8 for under-18s and qualifying apprentices. The apprentice rate applies to under-19s or those aged 19 and over in their first apprenticeship year; older apprentices who have completed that year receive their age rate. (GOV.UK current rates)
The 2026 remit asks for recommendations by the end of October. Government then decides the rates. The Treasury has confirmed the Budget for Wednesday 28 October 2026.
That makes the Budget a date to check, not proof that every wage announcement must appear that day. In the 26 November 2025 Budget speech, government accepted the LPC recommendations for April 2026. This year’s final decision still needs to be published.
Forty paid hours turn 47p into £977.60
Assume one employee aged 25 works a stable contract with 40 paid hours a week over 52 weeks: 2,080 paid hours annually, including paid holiday. They currently receive £12.71 throughout. There is no overtime, unpaid leave or bonus in this example.
Current annual gross pay is £12.71 x 2,080 = £26,436.80. At the central projection, £13.18 x 2,080 = £27,414.40. The difference is £977.60, from a 47p hourly rise, approximately 3.70%.
For the National Insurance model, carry forward the current ordinary employer rate of 15% and £5,000 annual secondary threshold. Those are verified 2026/27 HMRC figures, used as assumptions for this 2027 budget, not presented as a newly published 2027/28 payroll table.
The employee already earns above the threshold, so the entire increment attracts 15%: £977.60 x 15% = £146.64. Added to wages, that gives £1,124.24 before allowance. This is an annualised budget calculation; actual payroll uses its relevant earnings periods and rounding.
| April 2027 planning scenario | Hourly rate | Annual gross pay | Extra wages | Extra employer NI before allowance | Combined increase |
|---|---|---|---|---|---|
| LPC lower projection | £13.02 | £27,081.60 | £644.80 | £96.72 | £741.52 |
| LPC central projection | £13.18 | £27,414.40 | £977.60 | £146.64 | £1,124.24 |
| LPC upper projection | £13.34 | £27,747.20 | £1,310.40 | £196.56 | £1,506.96 |
These are scenario endpoints, not a promise that the eventual rate must stay inside them. A part-time employee with half the paid hours has half the wage increase, but employer NI need not halve if their earnings cross a threshold.
Three staff can leave the allowance intact
Employment Allowance can currently reduce an eligible employer’s annual employer NI bill by up to £10,500. It does not reduce the wages owed to employees or their own payroll deductions. Carrying that allowance into the planning model gives two different cash outcomes.
| Three employees on the assumptions above | Extra wages if allowance absorbs all extra NI | Extra wages and NI if allowance is unavailable or exhausted |
|---|---|---|
| Lower projection | £1,934.40 | £2,224.56 |
| Central projection | £2,932.80 | £3,372.72 |
| Upper projection | £3,931.20 | £4,520.88 |
Check headroom against the whole payroll. At today’s rate, three such employees generate £9,646.56 employer NI before allowance: 3 x (£26,436.80 - £5,000) x 15%. That leaves £853.44 of the assumed £10,500 allowance unused.
At £13.18, their liability becomes £10,086.48. The additional £439.92 fits inside that headroom, so the employer’s NI cash payment remains zero. Even the upper scenario’s £589.68 extra NI fits, provided there are no other liabilities using the allowance.
A fourth comparable employee would already take the baseline liability beyond £10,500. Other staff, bonuses or an owner’s liable director salary can change the result. Check eligibility, including the exclusion where a company’s sole director is its only employee liable for secondary Class 1 NI. Do not equate “small business” with automatic entitlement.
Youth alignment is nearly five times the wage rise
The government remains committed to aligning the 18 to 20 rate with the adult rate, but the remit leaves timing to the LPC. Full alignment in April 2027 is therefore a stress test, not an announced policy date.
Take an employee who remains under 21 throughout the modelled year, on the same 2,080 paid hours. Moving from £10.85 to the central adult projection of £13.18 would raise annual wages from £22,568 to £27,414.40: £4,846.40 extra, or approximately 21.47%.
That is 4.96 times the adult employee’s £977.60 gross increase. But do not add 15% employer NI automatically. HMRC’s under-21 relief gives a 0% employer rate below the upper secondary threshold: the published limits are £967 weekly and £50,270 annually. The example’s £527.20 weekly pay is below that limit.
Assuming that relief continues, the youth increase remains £4,846.40 before pensions and other costs. Compared with the adult’s £1,124.24 increase where allowance is exhausted, the ratio is 4.31, not five. A birthday ending the under-21 relief needs its own payroll calculation; wage-band alignment would not itself abolish that separate NI relief.
Put a review point into April-spanning quotes
Start with each employee’s actual paid hours, age milestones, current rate and NI category. Run all three adult projections, a separately labelled youth-alignment scenario, and the employer’s remaining allowance. These are the inputs to update in the employer cost calculator once confirmed rates arrive.
The tables isolate wages and employer NI. Add any pension contribution increase, contractual overtime effects and the cost of preserving pay differentials above the minimum. If the rise lands while a tax payment is due, see planning ahead for tax payments; sole traders should also revisit what to set aside. Paid holiday is already inside the 52 paid weeks here; adding 12.07% on top would double-count it for this regular-hours employee. See the wider cost of an employee before setting prices.
At the central exhausted-allowance scenario, recovering £1,124.24 over an illustrative 1,500 billable hours requires about 75p more revenue per billable hour, before any extra costs or margin. Use that as a pricing input, record the assumptions and agree how quotes extending into April will be reviewed. Recalculate when government announces the rates, rather than presenting a projection to staff as their confirmed statutory pay.
