Minimum Wage Underpayment Calculator, 2026/27
If a payroll review has flagged historic underpayment against the National Minimum Wage, a director needs to quantify arrears and likely penalty exposure quickly. Enter the shortfall details to see the back pay due and the potential HMRC penalty.
The minimum wage underpayment calculator runs on the rates and thresholds HMRC has published for the 2026/27 tax year, so the figures you see reflect the position your company is actually filing on rather than a historic set of bands. Change any input and the result recalculates immediately, with no sign-up and nothing sent anywhere.
If you are a director of a UK limited company, use it as a first look before a decision rather than as the decision itself. Arrears are calculated at current minimum wage rates, not historic rates, since HMRC requires underpayments to be corrected using today's rate, not the rate in force at the time of the underpayment. Real company positions bring in other income, reliefs, group structures and prior year adjustments that a single page of inputs cannot see, which is why the workings are written out below under payroll, paye & employment. Read those, then check the numbers against your own accounts, and speak to us if anything looks materially different from what you expected.
Last reviewed 12 September 2026 for the 2026/27 tax year. Reviewed by Waqas Sagar, Member of ICAEW, Fellow of ACCA, Fellow of AAT.
Regulated by
Regulated & AML supervisor
AAT fellow member
Xero Gold PartnerCertified advisor
QuickBooks PartnerCertified ProAdvisor100+ yearsCombined team experienceFully insuredUp to £2m indemnityMinimum Wage Underpayment Calculator
Result, 2026/27
Total arrears owed (all employees)
Arrears per employee
Potential HMRC penalty range
100%-200% of arrears, capped per workerCombined cost estimate (arrears + max penalty)
Illustration only, figures are based on the rates you have selected and the information entered. Please check your own position with us before acting.
Estimates for the 2026/27 tax year using published GOV.UK rates. Switch between 2026/27 and 2025/26 above.
How this is calculated
This calculator multiplies the hourly shortfall by hours worked per week and the number of weeks affected to give arrears per employee, then multiplies by the number of employees affected at the same rate to give total exposure across the business.
Crucially, HMRC requires arrears to be recalculated and paid at the National Minimum Wage rate current at the time of repayment, not the lower historic rate that applied when the underpayment occurred, which can make the true arrears bill larger than a simple historic recalculation would suggest.
The penalty range shown reflects the statutory penalty regime: normally 200% of the arrears, though this halves to 100% if paid within 14 days of the notice of underpayment, subject to a minimum penalty of £100 and a cap of £20,000 per worker.
How underpayments are typically discovered
Underpayments often surface through an employee complaint to the Acas helpline (which can trigger an HMRC referral), a routine HMRC compliance check, or an internal payroll audit after a rate change was missed, such as an apprentice moving onto the full rate or an 18-year-old turning 21.
Because HMRC can look back years rather than months when arrears have built up, even a small ongoing shortfall can accumulate into a significant liability once multiplied across the affected period and workforce.
Correcting an underpayment proactively
Where a business identifies its own underpayment before HMRC does, paying the arrears promptly and keeping a clear record of the correction, including the recalculation method used, puts the company in a materially better position than waiting to be investigated.
Reviewing payroll systems for the specific triggers that commonly cause errors, birthdays, apprenticeship anniversaries, salary sacrifice deductions and unpaid working time, reduces the chance of the same underpayment recurring.
What this means for your company
Treat the result as a planning figure for the 2026/27 tax year. If it changes what you were about to do, take a director's salary, a dividend, a large asset purchase or a filing decision, check it against your own accounts first. We can review the position with you and confirm the tax treatment before you commit.
Frequently asked questions
At what rate is minimum wage back pay calculated?
At the National Minimum Wage rate current when the arrears are paid, not the lower rate that applied at the time of the original underpayment, which can increase the total arrears due.
How big can an HMRC minimum wage penalty be?
Up to 200% of the arrears owed, reduced to 100% if paid within 14 days of the notice, subject to a minimum of £100 and a cap of £20,000 per underpaid worker.
Can HMRC name a company for minimum wage underpayment?
Yes, HMRC operates a naming scheme for confirmed minimum wage breaches above certain thresholds, which can carry reputational as well as financial consequences.
Does correcting the error voluntarily reduce the penalty?
It does not remove the statutory penalty automatically, but prompt voluntary correction and cooperation with HMRC is generally viewed favourably and can help resolve matters faster and avoid escalation.
Keep going
Related calculators
Same rates, different question.
Minimum Wage Calculator
Check whether hourly, weekly or salaried pay meets the 2026/27 National Minimum Wage or National Living Wage for the worker's age band.
CalculatorNational Minimum Wage Checker
Check pay against the correct National Minimum Wage band for 2026/27 in seconds, factoring in age, apprenticeship status and hours worked.
CalculatorNational Living Wage Calculator
Calculate weekly and annual pay at the 2026/27 National Living Wage for staff aged 21 and over, and compare it against a proposed salary.
CalculatorApprenticeship Wage Calculator
Check the minimum hourly and weekly pay for an apprentice in 2026/27 and see when they move onto the full age-related National Minimum Wage rate.