The following post has been written by Gary Vaux, Head of Money Advice Unit at Hertfordshire County Council.

Confirming that it will follow the recommendations of the independent Low Pay Commission – at paragraph 5.10 of the Autumn Statement 2022 – the government advises that this means the NLW for individuals aged 23 and over will increase by 9.7 per cent from 1 April 2023 (£9.50 per hour will be rising to £10.42)

In addition, it confirms that the LPC’s recommendations for the national minimum wage rates to apply from April 2023 have also been accepted, including to –

  • increase the rate for 21-22 year olds by 10.9 per cent to £10.18 an hour;
  • increase the rate for 18-20 year olds by 9.7 per cent to £7.49 an hour;
  • increase the rate for 16-17 year olds by 9.7 per cent to £5.28 an hour;
  • increase the apprentice rate by 9.7 per cent to £5.28 an hour; and

Although the ‘headline’ figure for the full adult rate could see this increase as being worth around £34.00 extra a week for someone working 37 hours (£147.50 if paid calendar monthly),  the impact on individuals will actually be very varied. Personal tax allowances will be frozen at £12,570 a year until April 2028, so if someone on NLW was working 37 hours per week, their annual pay would rise from £18,278 per year to £20,048. This rise of £1770 would mean additional tax of £354 a year, bringing the monthly gain down to £118.00. National Insurance of 12% on the extra pay would reduce that gain by a further £17.70 a month to £100.30.

If the person is getting universal credit, extra take-home pay of £100 a month would lead to a £55 reduction in Universal Credit, meaning the overall effect from the NLW increase for a person in this situation would be £45 a month.

This is only one scenario – part-time staff may have less tax and N.I. to pay, especially if they remain below the tax/NI threshold of £12,570. Many lower paid staff are not eligible for universal credit because of a working partner for example.

 

Gary Vaux
Head of Money Advice Unit | Community & Specialist Services | Adult Care Services
Hertfordshire County Council

 

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