National living wage to rise almost five per cent next year

The national living wage is set to rise nearly five per cent from £7.83 to £8.21 per hour, chancellor Philip Hammond revealed in today's Budget.

To be implemented in April next year, the government estimated that this will increase the annual pay of a person in full-time employment by £690 per year.

Additionally, Hammond said the Low Pay Commission will be given a new remit beyond 2020 as minimum wages look set to hit its target of 60 per cent of median earnings, subject to sustained economic growth.

"We will want to be ambitious with the ultimate objective of ending low pay in the UK," said Hammond.

"But we will also want to be careful – protecting employment for lower paid workers. So we will engage responsibly with employers, the TUC and the LPC itself over the coming months, gathering evidence and views to ensure we get this right."

However some cast doubt on the wage rise, in light of Hammond's other hike of the afternoon of personal tax allowance to £12,500 per year.

Tom Evennett, a private client services partner at EY, said:

"Today, despite the increase in the personal allowance to £12,500 from April 2019, the accompanying increase in the National Living Wage means that those working 35 hours a week on this wage will still be paying nearly £500 a year in income tax. 

"The National Insurance thresholds remains much lower than the personal tax allowance. This means, assuming 2018/19 rates, these individuals would also pay over £750 in National Insurance. Those under 25 on the National Minimum Wage may be outside the income tax net, but even these people find themselves paying National Insurance."