Tesco has cheered its highest market share since 2016 after ringing up a rise in sales as it said customers switched to the supermarket over the crucial Christmas season.

The UK’s biggest supermarket chain reported UK and Ireland like-for-like sales, excluding fuel and VAT, up 3.7% over the six weeks to January 4 and record trading in the week before Christmas.

It said sales over its third quarter before the Christmas period lifted 2.8% across the 13 weeks to November 23, with sales up 3.1% in total over the 19 weeks to January 4.

Tesco said it benefited from investments in prices as customers switched to the chain, with recent industry figures from Kantar showing its market share reached a nine-year high of 28.5% in the 12 weeks to December 29.

What I won't say is there will be no inflation, but we'll do out very best to minimise the impact

It confirmed it remained on track with recently upgraded full-year profit guidance for around £2.9 billion in retail underlying earnings.

Chief executive Ken Murphy said Tesco would “do our very best” to keep prices low in the face of a raft of cost increases linked to the autumn Budget.

Tesco, which has more than 300,000 employees, confirmed it was facing a hit of around £250 million a year from the increase in national insurance contributions when the changes roll out in April, with more hikes due from the minimum wage rise, which it will confirm when it reports full year results.

Mr Murphy said: “What I won’t say is there will be no inflation, but we’ll do out very best to minimise the impact.”

The firm is planning to make cost savings across the business to offset the extra wage bill, for example through better buying and freight.

The firm said it was not planning to make changes to its workforce or hiring plans, but Mr Murphy said: “We never make a commitment one way or another.

We invested to bring the best value, quality and service to everyone, no matter how or where they shopped with us. As a result, we delivered our biggest ever Christmas, with continued market share growth and switching gains

“Encouragingly though, we have added people to the business over the last couple of years.”

Tesco said customers were shopping both for value products over Christmas, but also trading up, with a 15.5% rise in sales of its premium Finest ranges.

The group’s UK and Ireland sales growth is lower than the 6% growth it notched up the previous Christmas, though figures in the previous year were boosted by high food price inflation.

Mr Murphy said: “We invested to bring the best value, quality and service to everyone, no matter how or where they shopped with us.

“As a result, we delivered our biggest ever Christmas, with continued market share growth and switching gains.”

He said that Tesco had gained customers from “all corners of the market” in recent months.