Low Pay Commission 2026 consultation – LITRG response

The LPC is seeking evidence on:

• The affordability and effects of an increase in April 2027 to an NLW rate within the range of £13.02 to £13.34, representing an increase of between 2.4 and 4.9 per cent, with a central estimate of £13.18, representing 3.7 per cent. These projected figures are indicative only.
• The impact so far of increases in the NLW in April 2026 on workers, employers, the labour market and economy.
• The effect of recent minimum wage increases for younger workers on their employment prospects.

We have written to the LPC to highlight concerns around two potentially wider impacts of the National Minimum Wage:

False self-employment: First, we warn that false self-employment remains a significant and growing problem. Employers facing rising labour costs may increasingly classify workers as self-employed to avoid minimum wage obligations and other employment rights. This practice can leave workers without legal protections, including entitlement to the minimum wage, while also potentially reducing tax and National Insurance revenues.

LITRG recommends that the LPC assess the scale and risks of employment status misclassification more explicitly, and ensure that these issues receive greater attention within the Fair Work Agency when it takes over enforcement responsibilities from HMRC.

Universal credit interactions: Second, we highlight concerns about how minimum wage increases interact with universal credit. While higher wages can improve earnings, claimants may not experience the full benefit because of tax, student loan repayments and reductions in universal credit. Particular concern is raised about the minimum income floor (MIF), which assumes certain self-employed claimants earn at least the equivalent of 35 hours at the National Minimum Wage, regardless of their actual earnings. As minimum wage rates rise, the MIF also increases, potentially reducing universal credit awards for low-earning self-employed workers and placing pressure on business viability and labour market participation.

LITRG recommends that the LPC undertake a fuller assessment of how minimum wage rates interact with universal credit and related thresholds, including the potential impact on claimants and whether such interactions undermine the objective of making work pay.