UK Minimum Wage Increases from April 2026 & What It Means for Salary Sacrifice Leasing

The UK Government has confirmed new National Minimum Wage (NMW) and National Living Wage (NLW) rates that come into effect from 1 April 2026. These changes reflect recommendations accepted in full from the independent Low Pay Commission and will impact payrolls across the UK.

New Minimum Wage Rates from April 2026

From the first pay reference period on or after 1 April 2026, employers must apply the revised minimum wage rates:

• National Living Wage (workers aged 21 and over): £12.71 per hour (up 50p, ~4.1%)

• 18–20 rate: £10.85 per hour (up 85p, ~8.5%)

• 16–17 rate: £8.00 per hour (up 45p, ~6.0%)

• Apprentice rate: £8.00 per hour (up 45p, ~6.0%)

• Accommodation offset: £11.10 per day (up 44p, ~4.1%)

These increases ensure that pay keeps pace with living costs while aiming to narrow the gap between youth and adult wage rates.

What This Means for Salary Sacrifice Leasing

Salary sacrifice schemes (including car and EV leasing) are widely used by employers to offer attractive employee benefits while delivering tax and National Insurance savings. However, minimum wage compliance remains a critical legal requirement. Under UK law, an employee’s cash earnings after any salary sacrifice must still meet or exceed the applicable minimum wage in every pay reference period. If a salary sacrifice arrangement reduces an employee’s take-home cash pay below the minimum legal rate, the employer risks non-compliance with minimum wage legislation.

Key Compliance Considerations

• Post-sacrifice pay cannot drop below the relevant NMW/NLW rate: Whether leasing a vehicle or another benefit, the reduced salary must still meet statutory minimums.

• HMRC compliance checks are per pay period. It’s not enough to average pay annually. Actual pay for each pay period must be compliant.

• Payroll systems must be updated ahead of April: Late updates to payroll may result in underpayments and potential enforcement action.

If employers overlook how salary sacrifice adjustments affect minimum-wage-counting pay, they may face arrears, penalties, or reputational risk.

Practical Steps for Salary Sacrifice Providers and Employers

As April approaches, now is the time to:

• Review existing salary sacrifice leasing arrangements to confirm post-sacrifice cash pay remains compliant at the new rates.

• Update payroll configurations to apply the new minimum wage rates from the correct pay reference period.

• Educate HR and payroll teams about the interaction between salary sacrifice deductions and statutory minimum wage compliance.

• Communicate changes to employees who may be close to the minimum wage thresholds to avoid surprises.

The Bottom Line

The April 2026 minimum wage increases are welcome for workers, but they add an important compliance dimension to salary sacrifice schemes, especially car leasing arrangements. Employers must act now to ensure schemes remain compliant, payroll systems are updated correctly, and employees continue to benefit without compromising their statutory rights.

If you offer salary sacrifice benefits or leasing solutions, auditing plans now will help protect your clients and their workforces from unintended compliance issues come April.