The National Living Wage 2024/25 decreased its age threshold from 23 to 21, which was in place since 2016. This significant change brings not more than 3 million working adults to the National Living UK wage policy. Find out more about the latest change here, how it affects UK employees, the projected rise next year, and more.
Quick Guide to the UK Minimum Wages
The UK minimum wage system was first introduced in 1999 by the Labour Government. Currently, there are four wage bands:
- National Living Wage (NLW) for employees aged over 21
- National Minimum Wage (NMW) for employees aged 18 to 20
- National Minimum Wage for employees under 18
- Separate Apprentice Rate for apprentices under or over 19
Below, we outline only the National Living Wage 2024 annual salary in the United Kingdom. For more information about each wage band, see UK Minimum Wage 2024: New Rates & How to Check Your Pay.
The Department for Business and Trade is responsible for implementing wage policies, advised by an independent body, the Low Pay Commission (LPC). The budget announcement is every April of the year.
The four wage categories above are all statutory, which means employers are legally obliged to meet the minimum income standard. An alternative higher-paying voluntary wage system is called the Real Living Wage RLW (currently £12 per hour), or London Living Wage (£13.15 per hour), set by the Living Wage Foundation.
This organisation contends that the government’s cost of living adjustment reflected in the National Minimum and Living Wage rates are not adequately fair, sustainable, and competitive, considering the ‘real’ cost of living.
See below for more information about the National Living Wage 2024 UK.
What Is National Living Wage Increase in 2024?
The minimum income threshold per hour for Living Wage rose from £10.42 to £11.44 last April 2024. Alongside the wage increase, the age threshold also decreased, from 23 to 21, which was the further action required to achieve the goal of reaching two-thirds of the median income of the relevant population in 2024.
The age threshold gradually decreased from 25 to 21. In 2021, the legal eligibility age started to reduce from 25 to 23. This year, the age threshold of 21 is finally achieved. Many UK businesses, already anticipating this change, had been adjusting salaries of their employees (21 years old and above) to the National Living Wage over the two previous years.
As most of the UK employers have been applying the National Living Wage to their 21- and 22-year-old employees’ paycheck for the last two years (some above NLW rates), the age threshold decrease did not come as a shock to many employers.
What Does the NLW Increase Mean for UK Employees?
The difference in the wage increase is £1.02 per hour, a 10% increase between the previous £10.42 and the current £11.44. This is reportedly the highest in a decade and the first time increase that exceeded £1.
For a full-time UK employee, the wage increase will result in more than £1,800 extra income in a year. Those who were previously paid the National Minimum Wage and moved to the National Living Wage will see an annual salary slip increase amounting to £2,300, which is a 12.4% increase overall.
The wage increase also boosts UK households, considering both levy and benefit.
Will the National Living Wage Increase in 2025?
Every October, the Low Pay Commission performs a wage review and submits recommendation to the Department for Business and Trade. The decision is announced on next year in April. The current suggested rate is between £11.65 and £12.18, resulting in a central projection of £11.89.
UK Minimum Wage FAQs
Once HMRC finds an employer has not paid the minimum wage, they may require repayment of up to six years’ back pay and impose fines up to £20,000 per affected employee, with a minimum fine of £100.
The minimum wage increase significantly impacts different industries, with retail businesses facing substantial rises in labour costs, particularly if they employ many entry-level workers.
The minimum wage pay is calculated based on gross pay, which includes basic pay, sales commission, performance-related pay, and other job performance-based payments before tax and National Insurance deductions.
In the UK, employers cannot reduce an employee’s salary in their employment contract without their consent, as employees have the right to refuse and may take legal action to prevent such changes.
Bonuses count towards the UK minimum wage, but regional allowances such as London Weighting and payments for shift work or overtime do not.
How Can Legend Financial Help?
The National Living Wage 2024 extending to 21- and 22-year-olds is a substantial change in the UK minimum wage system, fulfilling the government’s promise to end the low pay and promote wage equality. For some people, this may mean getting their income pushed to a higher tax bracket. Employers, on the other hand, will need to update their payroll system to ensure accurate pay.
Whether you are a UK individual or a business, our tax and financial advisors are here to assist in many aspects. We have served all kinds of clients for over ten years, dealing with all tax, accountancy, and business development matters. Find out more about how we can help you. Talk to us today!
