The price of a first class stamp is to increase by 2p to 62p and second class by 3p to 53p, the Royal Mail has announced.
The increases will take effect on March 31, two years after the last increase in stamp prices.
The now-privatised Royal Mail said it had "thought carefully" about the impact on customers and its business before making the decision.
Stephen Agar, Royal Mail's managing director of consumer and network access, said: "We understand that nobody likes to pay more, especially in the current economic climate. Our prices remain amongst the best value for money in Europe, and we have the highest service specification of any major European country."
Royal Mail said that, under the regulatory framework, it could have increased second class stamps to 57p, adding that its prices were among the best value in Europe, where the average for a first class letter is 67p and 60p for second class.
A large letter first class stamp up to 100g will rise by 3p to 93p, while a large second class stamp will go up by 4p to 73p.
Robert Hammond of Consumer Futures said: "A ny price rise is unwelcome especially at a time when household incomes are being squeezed and given that stamp prices have increased more than the rate of inflation over the past five years.
"This is a very significant increase in the price of an essential service and those consumers who continue to use it will look much harder at the value for money and quality of service that they get. Those without a reliable fast broadband connection or unable to use alternative means of communication to the post service will be the hardest hit, whether individuals or small businesses.
"Royal Mail's last full year financial results showed an increase in revenue and operating costs. Their customers would expect them to be making real cuts in their costs as we are all having to face in our household budgets. Royal Mail needs to modernise, but customers are being asked to pick up the tab."
John Allan, chairman of the Federation of Small Businesses, said: "Rising stamp prices are yet another unwelcome cost on doing business, especially for those who rely heavily on the postal service. Businesses will have to make a choice whether to absorb this rise or pass it on to their customers.
"With these extra costs, they will certainly be looking to Royal Mail achieving their delivery and service performance targets, and for Ofcom to use their powers to fine should they not be met."
Consumer Futures said the 3% rise in first class and 5% increase in second class stamp prices were above the current inflation rate of 1.9%.
Since 2009, prices have increased by 59% for first class and 77% for second class, the consumer group pointed out.