Rishi Sunak said the National Living Wage would increase from £8.91 an hour to £9.50 from 1 April 2022.
The 59p boost represents an inflation-busting 6.6 per cent hike.
It means full-time workers will get an extra £1,000 a year, the Treasury said.
The National Living Wage is the government-mandated minimum wage for people 23 and over.
Younger workers and apprentices will also receive a pay boost as the National Minimum Wage for people aged 21-22 is going up from £8.36 to £9.18 an hour and the Apprentice Rate will rise from £4.30 to £4.81 an hour.
The chancellor also confirmed the end of the public sector pay freeze.
The year-long “pause”, which did not apply to NHS workers, was introduced as part of government efforts to balance the books during the Covid 19 crisis.
Sunak said: “With the economy firmly back on track, it’s right that nurses, teachers and all the other public sector workers who played their part during the pandemic see their wages rise.”