Chancellor Rishi Sunak is set to announce an increase in minimum wage at Wednesday's budget.
The new national living wage will see a jump from £8.91 a month to £9.50 starting April 2022, reports the Mirror.
Ministers accepted the above-inflation recommendations from the independent Low Pay Commission, which will amount to an estimated £1,000 more a year for the average worker from April.
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Tory ministers have previously claimed they would raise the minimum wage to £10.50 an hour and expand the eligibility to over-21s by 2024.
That is because ministers pledged future rises would be pegged to two-thirds of median earnings, higher than the previous 60% target.
From 1 April, the hourly rate for people aged 21-22 goes up to £9.18 an hour and Apprentice Rate increases to £4.81 an hour.
The Government is under intense pressure to ease the burden on struggling families who are facing a growing cost of living crisis.
But the Treasury was said to be concerned about the impact of wage hikes on smaller companies.
Labour has demanded the hourly rate be increased to at least £10 but there was a row at the party's annual conference last month over whether it should be hiked to £15.
Announcing the move, Mr Sunak said: "This wage boost ensures we’re making work pay and keeps us on track to meet our target to end low pay by the end of this Parliament."
