National Living Wage: has your pay gone up?

National Living Wage: has your pay gone up?

author: Dan Griffiths

By Dan Griffiths


On Friday 1st April 2016, the government introduced the new National Living Wage of £7.20 an hour.

If you were earning minimum wage before, you should now be 50p per hour better off.

This only applies to those aged 25 and over, though. So if you’re younger than this, unfortunately you won’t be getting a pay rise just yet.

The good news - it all adds up

While 50p extra an hour might not sound like a lot, it could make all the difference once it adds up.

For example, working full-time (eight-and-a-half hours a day with one hour of unpaid lunch) on the old minimum wage of £6.70 an hour, you would earn £50.25 a day. On the National Living Wage, this would be £54 - an extra £3.75 a day.

Again, it doesn’t sound like a lot. But, on an average four-week month working five days per week, your pay would go from £1,005 to £1,080 per month.

To put it into context, if you work full-time you should now be earning an extra £900 a year before tax.

The not-so-good news - you might have to pay more tax

Although your wages should still go up, if you’re working full-time, you will have to pay tax on the extra £900 a year you earn. In the above example, this means you would have to pay an extra £180 a year in Income Tax, alongside your National Insurance payments.

The yearly tax-free threshold currently set by the government is £10,600. This means that you don’t have to pay tax on your income if you earn less than this in a year. Once you earn over this amount a year, you’ll pay 20% in tax on every pound over £10,600. For more information on the Income Tax thresholds, head to the gov website here.

It’s unlikely your wage increase will mean your tax bill is affected if you only work part-time.

But there’s still plenty to smile about

Even if you do have to pay more in tax, the minimum wage rise is still good news if you’re 25 or older. Whether you’re part-time or full-time, an extra 50p an hour really does add up.

And if that’s not got you smiling already, the government plans to gradually increase the National Living Wage to over £9 an hour by 2020. If all goes to plan, that should really give you something to look forward to! 

Disclaimer: All information and links are correct at the time of publishing.

author: Dan Griffiths

By Dan Griffiths

National Living Wage: has your pay gone up? National Living Wage: has your pay gone up?