£13.20 an Hour From April: The Budget Bits Every Small Employer Needs

£13.20 an Hour From National Living Wage April 2027: The Budget Bits Every Small Employer Needs

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Right, the Chancellor has sat down, the chanting has (mostly) stopped, and somewhere a lot of payroll teams have just put the kettle on. John Healey delivered his first Budget today, and the big one for employers is the national living wage April 2027 rise to £13.20 an hour. The headlines will be all about energy bills and banks, but there is a fair bit more tucked in there for anyone who employs people or runs a small business.

So let's jump straight in. People stuff first, then small business, then a quick round up of everything else so you can hold your own at the coffee machine.

One honest note before we start: this is based on the Chancellor's speech. The full Budget documents and GOV.UK guidance will fill in the dates and small print, and some measures were announced as "coming soon" rather than ready to go. Where the detail isn't out yet, I've said so.

Part 1: Your people

1. Minimum wage rates rise 3.9% from April 2027

Here's the heart of it for most of our clients. Both the National Living Wage and the National Minimum Wage go up by 3.9% from April 2027. That covers around 2.3 million of the lowest paid workers.

• National Living Wage (21 and over): £12.71 rising to £13.20 an hour
• 18 to 20 year olds: £10.85 rising to £11.27 an hour
• 16 to 17 year olds and apprentices: also rising, so check the confirmed rates on GOV.UK before you update payroll

Worth knowing: the rise is the same percentage across the bands. That ends the recent pattern of bigger jumps for 18 to 20 year olds. The government has promised to move towards one adult rate, so expect that conversation to keep going.

What to do now: don't just look at the people on the minimum. Look at the people sitting 20p or 30p above it. When the floor rises, your supervisors and team leaders can suddenly find themselves earning barely more than the people they manage. That's when the grumbles (and the resignations) start. Budget for the knock on effect, not just the legal minimum.

2. Mileage rates: higher rate up and made permanent

Earlier this year the approved mileage rate for the first 10,000 business miles went up to 55p, backdated to 6 April 2026. Today the Chancellor said that increase is being made permanent. The higher rate (for miles over 10,000) goes up from 25p to 35p.

This matters if you have care workers, engineers, sales teams, or anyone else who practically lives in their car for work.

What to do now: check your expenses policy. If it quotes 45p, or says 25p for higher mileage, it's out of date. Confirm the start date for the 35p rate before you change anything.

3. Self employed fathers and partners get paid parental leave

For the first time, self employed fathers and partners will be eligible for paid parental leave. The Chancellor called it a "down payment" on wider paternity reform, which ties in with the government's ongoing review of parental leave.

This doesn't change your obligations to employees today. It is a clear signal of direction, though. If paternity leave is getting a rethink, your family friendly policies will need a refresh at some point too.

4. Carer's Allowance cliff edge removed

At the moment, if someone on Carer's Allowance earns even a penny over the earnings limit, they lose the whole allowance. That cliff edge is going, so people won't lose everything for earning slightly more.

Why should employers care? Because a lot of carers keep their hours artificially low to protect their allowance. If that fear goes, some of your part time carers may be happy to pick up extra hours. Worth a conversation (a supportive one, not a pushy one).

5. Pay transparency in job adverts is coming

The Chancellor said the government has "heard calls" for pay transparency on job adverts to close the gender pay gap, and "will act soon". There's no detail yet. But if you still advertise roles with "competitive salary", now is a good time to get comfortable putting an actual number on it.

6. Non compete clauses are being reformed

Alongside changes to skilled worker visas, the government is reforming non compete clauses in contracts so people can move more easily between companies. Detail to follow. If you rely on restrictive covenants in employment contracts, keep an eye on this one and get them reviewed once the rules are published.

7. Share schemes get more generous

For growing businesses trying to attract and keep talent:

• A new EMI 2 scheme building on the existing Enterprise Management Incentives
• The Company Share Option Plan doubled in generosity

If you've been thinking about share options as a retention tool, this makes them more attractive.

8. Skills, apprenticeships and young people

• £100 million for a local apprenticeship service to match young people with local firms
• Funding for the Union Learning Fund to back workers as AI changes jobs
• The Milburn review into young people out of work reports next month, with a government response before the end of the year and legislation next year

9. No change to tax on wages

The Chancellor confirmed no change to tax on income from employment. Tax on income from savings and property goes up by a further two percentage points from April 2027. Your payroll tax calculations for employees aren't affected by today's announcements.

Part 2: Small business

The Chancellor made a point of name checking the bakeries, cafés and hair salons. As someone who will happily drive across Hampshire for a good independent coffee shop, I'm all for it.

Business rates

• Small business rate relief for retail, hospitality and leisure: the threshold rises from £12,000 to £18,000 rateable value. That takes around 70,000 more businesses out of paying business rates altogether. The Chancellor says half of all shops, restaurants and gyms will now pay no business rates at all.
• Everyone else in those sectors: rates frozen in real terms, so no above inflation rise for the next two years.
• Pubs, clubs and music venues: the previously announced 20% cut starts from April next year.
• Adult gaming centres and vape shops are carved out of the reliefs.

Check your rateable value on GOV.UK and confirm the start date with your council.

Starting and growing a business

• Trading allowance tripled from £1,000 to £3,000. That's the amount you can earn from a new venture tax free.
• A new young entrepreneurs allowance covering a year of living costs for young founders
• £200 million from the British Business Bank for women led businesses, plus a scale up programme for female founders
• A new founders' relief: a 10% capital gains tax rate on lifetime gains up to £10 million for founders of the most successful firms
• Business Asset Disposal Relief limit cut from £1 million to £500,000 (the Chancellor says three in four claimants won't be affected)
• Capital allowances: full expensing stays, the main first year allowance rises from 40% to 50%, and the main writing down allowance drops from 14% to 12%

Running costs

• Fuel duty: the 5p cut and the low red diesel rate are extended to July
• Energy: a new British Industrial Competitiveness Scheme takes 25% off electricity bills for 10,000 industrial firms from April. (The VAT cut on electricity is for households, not businesses.)
• Red tape: the Better Regulation Executive is back, with £800 million of regulation and tariffs to be removed
• Small brewers and cider makers: £10 million of alcohol duty relief

Tax admin

• From 2029, self assessment moves towards smaller, more regular payments instead of big lump sums
• HMRC gets more funding and stronger powers to chase overdue tax
• Rules on taking profits out of your company are being changed so they're taxed consistently, while protecting genuine commercial deals and family business handovers
• Online marketplaces face tougher rules so sellers can't dodge VAT

Part 3: Everything else, in brief

• Energy bills at home: VAT off household electricity extended to July (about £50 off the price cap), plus a £100 energy payment this winter for households in council tax bands A to D. Gas standing charges to be removed from household bills from next year.
• The economy: growth forecast upgraded to 1.2% this year. Borrowing forecast to fall to 4.2% of GDP this year.
• Savings: the cash ISA limit stays at £20,000. A new starter ISA is planned, and a first time buyer ISA will replace the Lifetime ISA.
• Housing: a £4.7 billion equity loan scheme for first time buyers from next spring, £1.5 billion more for social and affordable housing, and £430 million to keep the rough sleeping offer open for the rest of this Parliament.
• Pensioners: those with income up to the full new state pension won't pay income tax this Parliament. The triple lock will be adjusted from 2030.
• Banks: an extra 3% bank surcharge for 15 months from January to pay for energy support.
• Gambling: machine games duty up from 20% to 25% on higher stakes machines.
• Defence: £10 billion of support for Ukraine and work towards 3.5% of GDP on defence by 2035.
• Local areas: 100% of business rates to be kept locally by the end of the decade, and mayors get powers for an overnight visitors levy from 2028.
• Children's books: £15 million for organisations like Dolly Parton's Imagination Library and the Book Trust. Lovely.

Let's round this out with a little to-do list

🔴 Red (do this before April 2027)

• Budget for the new pay rates, including the knock on effect on people paid just above the minimum
• Tell your payroll provider and check your pay reference periods

🟠 Amber (sort this in the next couple of months)

• Update your mileage and expenses policy
• Check your rateable value if you're in retail, hospitality or leisure
• Have a supportive chat with any carers on your team about hours

🟢 Green (watch this space)

• Pay transparency in job adverts
• Non compete clause reform
• Wider paternity leave changes
• Share schemes, if you're growing and want to keep your best people

Not sure where you stand?

A Budget is a good moment to check your foundations. If your contracts, pay structure or policies haven't had a look in a while, our free HR Health Check gives you a quick Red, Amber, Green picture of where you are, and what to fix first.

Take it at www.kateunderwoodhr.co.uk, drop us a line at hello@kateunderwoodhr.co.uk or call 02382 025160.

Stay informed, not panicked.

Kettle On, Standards Up.