The UK’s Budget 2026, published today, focuses immigration policy on attracting high-skilled workers and graduates.
High-skilled routes
The Government wants “the most pro-business migration system in Europe for high-skill workers.” It has expanded the Global Talent visa endorsed funder pathway, letting over 100 R&D-intensive businesses sponsor leading scientists and engineers, and widened the High Potential Individual (HPI) visa to graduates of the world’s top 150 institutions, with a proportional increase to the cap.
The Graduate visa will extend to two years (from its current post-study period) for graduates of “high compliance” universities with strong labour-market outcomes, helping the UK retain international graduates in skilled work.
From 2027, the highest-skilled sponsored workers will get a curtailment period of up to six months (duration depending on time in their previous role), giving longer to find new sponsorship if their job ends.
From spring 2027, the Government will adopt the Migration Advisory Committee’s (MAC) recommendations on salary thresholds: occupation-specific minimums drop from the median to the 25th percentile; the general threshold is uprated using 2026 wage data, then annually against ONS (ASHE) wage inflation; new entrant discounts are consolidated into one figure; and the PhD salary discount is removed. Sponsoring employers should factor these changes into recruitment and salary planning.
Tax treatment of Certificate of Sponsorship and Immigration Skills Charge fees
From 28 October 2026, Finance Bill 2026–27 will exempt an employer’s payment of the Certificate of Sponsorship (CoS) fee and the Immigration Skills Charge (ISC) from income tax, removing uncertainty over whether employer-funded sponsorship costs are a taxable benefit for the sponsored worker.
Employers must pay both the CoS fee and, where applicable, the ISC, and cannot recover these costs from the sponsored worker. The ISC applies when assigning a CoS for most Skilled Worker and Senior or Specialist Worker sponsorships; the CoS fee is payable per certificate. Previously, HMRC could treat employer payment of these costs as an employment-related benefit, triggering income tax and employer National Insurance; the new legislation confirms no taxable benefit arises for the employee.
The exemption only concerns income tax; it does not change the ordinary corporation-tax rule allowing deduction of revenue expenses incurred wholly and exclusively for business purposes. As employer regulatory costs tied to recruiting and retaining sponsored staff, the ISC and CoS fee should generally remain deductible for corporation tax, subject to the usual rules.
Current costs: the ISC, charged per sponsored worker, is £480 for the first 12 months for small or charitable sponsors and £1,320 for medium or large sponsors from 16 December 2025 (further amounts apply for each additional six months). The CoS fee for Skilled Worker, T2 Minister of Religion, and Senior or Specialist Worker routes is £525 per certificate.
Practical effect
- Employees: no income-tax charge arises on employer payment of the CoS fee or ISC for payments made on or after 28 October 2026.
- Employers: costs remain employer-borne and are treated as business expenses for corporation tax.
- Sponsors: must still comply with Home Office rules prohibiting recovery of these costs from workers.
- Other costs: the exemption is specific to the CoS fee and ISC; visa fees and the Immigration Health Surcharge can still raise separate benefit-in-kind questions.
Sponsored workers: Navigating benefit-in-kind and pay parity risks
It remains to be seen if HMRC now pursues collection for prior tax years where it remains unclear that HMRC would be on strong footing to enforce tax collection for these charges.
This future legislation change brings clarity, but some would argue that the position for historic years is not necessarily clear cut and there may yet be grounds for arguing no BIK for such historic costs too. Updated advice should be taken
Further details on this topic can be found here.
