The price of a first class stamp is to increase by 5p to 46p and by 4p to 36p for second class next April, the Royal Mail announced today.
The cost of posting a large letter will rise by 9p to 75p for first class and by 7p to 58p for second class mail.
The Royal Mail said stamp prices for letters weighing up to 100g will continue to be among the lowest in Europe even after next April.
The increase will add around 7p to the average household's weekly spend of about 60p on postage, said the postal group.
Moya Greene, Royal Mail's chief executive, said: "We have thought carefully about these increases as we are conscious of the difficult economic circumstances our customers are facing. No-one likes to pay more and we regret having had to take these tough decisions on pricing. After these increases, we will continue providing value-for-money as our prices will still be among the lowest in Europe.
"We are investing heavily to modernise our operations, which is all about providing our customers with the services they need in today's open, highly competitive postal marketplace.
"With the sharp declines in mail volume, our revenues are falling. That means if we don't generate more income, we will simply not be able to keep funding our six-days-a-week collection, sorting, transport and delivery operation to the UK's 28 million homes and businesses."
The Royal Mail pointed out that in the last financial year, it lost £163 million on stamped mail, equivalent to a 6.4p loss on average on every stamped item it handled.
The price of sending a standard parcel up to 2kg in weight will be unchanged but will increase by 8% for heavier items.
Special delivery services will start from £5.45 next April, an increase of 40p, while a charge of £210 a year will be introduced for customers to collect mail from their delivery office after 8.30am.
This service, used mainly by business customers, is currently provided free of charge.
Philip Cullum, Deputy Chief Executive of Consumer Focus, said: "This latest increase in stamp prices could add at least £30 million to the cost of people's Christmas post next year. Consumers will be extremely disappointed by the latest inflation busting increase given that stamp prices having gone up at double the rate of inflation over the last five years.
"Royal Mail needs to modernise but customers are being asked to pick up the tab. In return, they will expect to see a far more efficient, effective and competitive service. Consumers can't be expected to continually bail out an inefficient Royal Mail."
An Age UK spokesman said: "Older people are more likely to be affected by an increase in the price of stamps simply because they are less likely than younger age groups to communicate via the internet and email.
"Although the planned 5p rise will seem paltry to many, it still represents a 12% increase to the current price which could make quite a difference to those on a low fixed income."
Billy Hayes, general secretary of the Communication Workers Union, said: "Royal Mail currently delivers first and second-class post at around half the price of TNT, DHL and other private mail companies.
"This price rise is a sign of things to come. If the Government succeeds in privatising Royal Mail, then consumers will inevitably see prices soar much higher than this - you ain't seen nothing yet.
"Problems with regulation of postal competition have left Royal Mail delivering mail for its competitors at a loss, which has massively eroded its finances. If we want an affordable, universal post system, then the Government must radically alter the regulatory regime, support Royal Mail and keep the post public."
John Walker, chairman of the Federation of Small Businesses, said: "The FSB feels this increase sets an unhealthy precedent for future price increases as the Postal Services Bill goes through Parliament, and is yet another blow to cash-flow for small businesses.
"It is especially galling as the Hooper Review earlier this year showed that Royal Mail is still not delivering in its service to small businesses."
The Royal Mail added that the collection service, for which a charge is to be introduced, is only used by a small proportion of business customers.