The government says more than a million workers could benefit
Adults must be paid at least £5.05 an hour, up from £4.85, while 18 to 21 year olds will get 15p more at £4.25.
The increase follows a report from the Low Pay Commission which said the number of jobs had grown since the minimum wage was introduced in 1999.
Unions welcomed the rise and said the "bleatings" of business looking for a wage freeze should be ignored.
"The increase will see well over a million low-paid workers with more cash in their pockets, many of them women working part-time," Brendan Barber, TUC general secretary, said.
"But, as ever, with each minimum wage increase comes the predictable wave of protests from business saying that it cannot afford another rise."
The government needs to recognise that the economy is worsening, while business costs are rising
Lewis Sidnick, British Chambers of Commerce
How the minimum wage works in practice
Further rises planned
Further increases to the minimum wage are in the pipeline.
Back in February the government provisionally accepted the commission's recommendations that the rates should be further increased to £5.35 and £4.45 in October 2006.
However, the commission will report again early in 2006 on whether the UK economy can sustain a further rise in the minimum wage.
But business leaders are asking for an urgent reappraisal of planned future increases to the minimum wage.
"When the wage was introduced it was set at a reasonable level but since we have seen large increases," Lewis Sidnick, employment policy adviser at the British Chambers of Commerce (BCC) said.
"The government needs to recognise that the economy is worsening, while business costs are rising."
Sir Digby Jones, director general of the CBI added that next year's planned rise to £5.35 an hour would have a "serious impact" on some sectors of the economy.
"The UK is already edging towards the top of the international minimum wage league table," Sir Digby said.
"So it is critical that the impact of these increases is carefully considered by the government."
From Saturday, the minimum wage (in the United Kingdom) will be increased to £5.05 (approximately $8.94 USD) which will affect more than a million workers. People aged between 18 and 21 will have a 15p increase to £4.25. Over 21s will be able to get at least £5.05 an hour, up from £4.85.

According to the Low Pay Commission the number of jobs had grown since the minimum wage was introduced in 1999 and so a further increase was necessary. "The increase will see well over a million low-paid workers with more cash in their pockets, many of them women working part-time," Brendan Barber, TUC general secretary, said. "But, as ever, with each minimum wage increase comes the predictable wave of protests from business saying that it cannot afford another rise."

Further increases are expected to happen sometime in the future. In October 2006 the government said an increase for adults should be put to £5.35 and £4.45 for 18-21 year olds. This would have a "serious impact" according to Sir Digby Jones. "The UK is already edging towards the top of the international minimum wage league table."