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New tax year brings changes to the National Minimum Wage

Along with the now standard increase in tax thresholds at the start of a new tax year, there are regular increases in the National Minimum Wage (NMW) now too. These encompass the National Living Wage (NLW) too, so every entitled person paid at these levels gets an increase from 1st April 2018. These increases are the largest increases for a decade for 18-24 year olds and along with the increase in tax-free allowance, should bring a little relief to the purse strings.

What is the National Minimum Wage?

The NMW is the minimum payable to most workers.  This rate is set by the government and broken down by age bracket.  It was introduced in 1998 and makes sure workers are paid at a minimum level.  Increases are recommended by the Low Pay Commission (LPC) and while they take a variety of factors in to account, pay levels for ‘decent’ living standards isn’t one of them.

It doesn’t apply to directors, but will apply to your employees and the rate will usually be revised each year.  There’s a range of other workers that aren’t entitled to the NMW including self-employed persons and volunteers.


How does the NLW fit in to this?

The National Living Wage was introduced in 2016 for workers aged 25 and over, as part of the move to a higher wage, lower tax, lower welfare society.  Whilst it is higher, it’s not necessarily meant to equal a wage high enough to live on.


What are the new rates?

From the 1st April 2018 the current NMW & NLW rates will increase to:




Age Range



In first year of apprenticeship, no qualifying age.

Under 19 and in apprenticeship.



Under 18









25 and over

What do I need to do?

You must make sure all your employees meet the minimum standards they are entitled to.  You can check this using HMRC’s Minimum Wage Calculator and if you find anyone who needs their salary/rate increasing this must be done from 1st April 2018.

If you find you have employees who’ve been paid under the minimum wage you need to rectify this immediately and pay any arrears owed straight away.

As there are complexities to who’s entitled and how NMW is calculated, please let us know if you’d like some help with this.

When looking at whether the NMW is met you shouldn’t include things like expense reimbursements and things the worker purchased for the role but wasn’t reimbursed for.


What if I don’t do anything?

In short - there will be penalties and they’ll be big!

It’s a good idea to review salary levels regularly anyway, but you should make sure any workers on/near NMW rates are being paid the correct amount.  If you find they haven’t been paid enough, HMRC will impose penalties of up to 200%, with a maximum of £20k per worker.

The more severe the case the higher the penalty, but HMRC are very serious about this. If they find it before you they won’t hold back and they have the power to name and shame employers who haven’t met their minimum wage requirements.


We’re here to help

If you’re unsure about any of the above or would like us to help make sure your company is meeting its NMW requirements please get in touch.

Should you find you haven’t been meeting the requirements and need help to rectify this we can help with that too - the quicker you act the better, so get in touch ASAP.

Tags: Tax

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