The minimum wage which an employee or a worker gets depends on the age of an individual as well as if they are a trainee. The National Minimum wage is the minimum pay per hour which each worker is entitled to get. The National living wage, which was introduced on 1 April 2016, is more than the National minimum wage which workers get if they are over 25 years of age. Irrespective of the business size, employers are liable to pay their employees the minimum wage. To be eligible for the National minimum wage, workers must be at least school graduating age. Employees or workers are also eligible to the minimum wage if they are:

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  • a part-time employee
  • working as a casual labor (hired on a daily basis)
  • agency workers
  • employees and home-workers who are paid for the number of items they make
  • trainees
  • differently-abled workers
  • offshore workers
  • workers in the agricultural fields
  • foreign workers
  • seafarers

Apprentices are eligible for the minimum wage, at the apprentice rate, if they are either:

  • below 19
  • 19 or above and they are in the initial year of their apprenticeship
  • Apprentices above 19 years who have completed the initial year of their apprenticeship are entitled to the accurate minimum wage for their age

Employees or workers of the following types are not entitled for the National Living Wage or National Minimum Wage:

  • People running their own business i.e. self-employed individuals
  • Directors of a company
  • Workers doing voluntary work
  • Working for a government service programme, e.g. the work programme
  • Armed forces members
  • Employer’s family members living in the employer’s home
  • Workers below the school leaving age i.e. under 16
  • Students how are on a work placement of upto 1 year
  • Government pre-apprenticeships schemes workers
  • Workers from the selective European Union programs such as Leonardo da Vinci, Comenius, Youth in Action, and Erasmus
  • Fishermen
  • Convicts
  • Individuals working and living in a religious community

In addition to the above mentioned points, individuals are classified as doing voluntary work if they get certain benefits such as meal expenses or reasonable travel and are working for a charity or a voluntary organization / fund-raising institution.


From 1 April 2016, a new mandatory National Living Wage (NLW) was introduced by the government for workers whose age is 25 and above. The NLW is initially set at £7.20 which is a rise of 50p in comparison to the current National Minimum Wage (NMW) rate. The adult NMW rate at present is £6.70. The National Living wage was introduced through an amendment to the National Minimum Wage regulation of 2015. This amendment was made to make sure that the rules that apply to the National Minimum wage rates for workers below 25 years also applies to workers eligible for the National Living Wage.

The government in the United Kingdom desires a shift from the low wage – high tax – high welfare society to a high wage – low tax – low welfare society. The government has a strong believe that it is the right time to take corrective measures to make sure that low wage workers can take a greater share. The National Living Wage is an essential step towards this development.

Starting 1 April 2016, the National Living rate will be applicable to any pay allocated on a monthly reference period. An employer will be required to check the rate that was applicable at the beginning of the pay reference period in case the pay reference period starts or ends at either side of 1 April 2016. For instance, if the pay reference period begins from 19 April, the pay from 1 April 2016 to 18 April 2016 will be calculated based on the National Minimum Wage rate and based on the National Living Wage rate from 19 April 2016.

The National Living wage and the National Minimum Wage is the minimum rate of pay per hour that pretty much every employee is entitled to under UK law. It’s determined by age and whether an individual is an apprentice or not.


  • Workers above the school leaving age will be eligible to receive the National Minimum Wage
  • The Low Pay Commission reviews the National Minimum Wage or the National Living Wage annually
  • Employers can receive a legal notice from the HM Revenue & Customs (HRMC) or can even be taken to court for not paying the NMW / NLW
  • The necessary National Living Wage is the national rate set for people with age 25 and above


These below mentioned rate come into effect from 1 October 2015 and are applicable for the pay reference period beginning on or after that dat. The rates applicable from 1 October 2015 are:

  • £3.30 for apprentices below 19 or 19 or who are in the initial year of apprenticeship
  •  £3.87 for the ones who are above school leaving age (16 years) but under 18 years
  • £5.30 for individuals between 18-20 years
  • £6.70 for workers whose age is 21 and above

Starting October 2016 the new rates will be:

  • £3.40 for apprentices below 19 or 19 or who are in the initial year of apprenticeship
  • £4 per hour for the ones who are above school leaving age (16 years) but under 18 years
  • £5.55 per hour for workers between 18-20 years
  • £6.95 per hour for workers between 21-24 years


The act of forging the payment records of paying workers less than the National Minimum Wage is against the Law. The worker should talk to the employer if he/she is not paid according to the correct rate and try to resolve the matter informally. If the matter is not resolve amicably, the worker can make a formal objection to the employer. In the worst case scenario, a worker can make complaint to HM Revenue & Customs and if the HMRC finds out that the employer is defaulting, HMRC can send a notice of amount outstanding along with the penalty for not paying the accurate rate of pay to the worker.

With the introduction of the National Living Wage the penalty for failure to pay will be 200% of the amount payable, unless the amount outstanding is paid within 14 days. The utmost fine for failure to pay will be £20,000 per worker. On the other hand, employers who fail to pay will be expelled from being a company director for upto 15 years.


For the accounting period that is in default, surcharge is a percentage of the VAT amount outstanding on the due date. If the business defaults again in a surcharge period, the surcharge rate increases with every default. There is no charge for the first default and the business pays for the subsequent defaults as follows:

Salary / Gross Pay £68,400 £5,700 £1,315
Tax Free Allowance £11,000 £917 £212
Total Taxable £57,400 £4,783 £1,104
Income Tax Paid £16,560 £1,380 £318
National Insurance £4,701 £392 £90
Total PAYE Deductions £21,261 £1,772 £409
Student Loan £0 £0 £0
Net Wage / Take Home Pay £47,139 £3,928 £907
NI Employer £8,320 £693 £160


DNS Accountants is a skilled taxation and accounts management firm that offers complete range of wage computation services to individuals across the United Kingdom. DNS has a strong track record of supporting individuals to manage and plan their savings. DNS helps individuals manage their tax home wage and file tax returns. DNS is a well-known firm of CA’s or ACA’s with operations in various counties and cities of the United Kingdom. The firm’s learned team focuses on helping people with their wage calculation and other services such as bookkeeping, accounts management, self-assessment, business start-up, payroll-management and taxation advisory. The firm is very fair in its dealings & delivers unmatched customer service and consistent support to the clients. At DNS, we are constantly in touch with our clients. DNS Accountants are the best for tax credit support as:

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DNS Accountants offers taxation & accounting services to individuals and owner managed businesses. Our learned team of CAs / ACA and tax accountants helps clients with services ranging from bookkeeping to payroll to tax planning, and filing tax returns. DNS Accountants help clients focus on maximizing their wealth.

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