UK Immigration White Paper - Part 2: Immigration Skills Charge

On 12 May 2025, the Home Office published its latest white paper, Restoring Control Over the Immigration System, outlining a series of proposed reforms to the UK’s immigration framework. Amongst several proposals that look to improve the structure of the system, there were also a number of measures that affected the costs associated with the process of sponsoring foreign workers.

In this second instalment of a two-week series from Irwin Mitchell’s immigration team analysing the proposed reforms of the White Paper, we will be looking at the proposed increase to the Immigration Skills Charge, and how it can potentially impact the sponsorship process.

What is the Immigration Skills Charge?

When a licenced sponsor assigns a Certificate of Sponsorship (“CoS”) to an individual who is applying for a Work visa - such as the Skilled Worker or Global Business Mobility: Senior or Specialist routes - they are required to pay a fee to assign the CoS, and potentially an additional fee known as the Immigration Skills Charge (“ISC”). 

The amount payable is dependent on the size of the sponsoring organisation. Currently, small or charitable sponsors will pay £364 for the first year of sponsorship, and £182 for each additional six-month period, whilst medium or large sponsors will pay £1,000 for the first year of sponsorship, and £500 for each additional six-month period. 

An organisation is generally classified as a small sponsor if at least two of the following apply:

• Annual turnover is £15 million or less
• Total assets are worth £7.5 million or less
• 50 employees or fewer

As an example, a large organisation seeking to sponsor a foreign national as a Skilled Worker from initial entry to the UK to settlement eligibility (typically five years) would incur a total Immigration Skills Charge of £5,000.

What changes have been proposed?

The White Paper sets out the Home Office’s intention to increase the ISC by 32% - the first rise since the charge was introduced in 2017. This adjustment is framed as an effort to bring the fee in line with inflation. 

In effect, the fee for small and charitable sponsors would rise from £364 to £480.48 per year of sponsorship, whilst the fee for medium and large sponsors would rise from £1,000 to £1,320 per year of sponsorship.

The ISC has been one of the few fees associated with the sponsorship process for foreign workers that has not increased in recent years, while other associated fees – such as visa application fees, the Immigration Health Surcharge, and the Certificate of Sponsorship assigning fee - have already seen notable increases. 

In a significant development, the Home Office has recently clarified that employers are not permitted to pass on the cost of the ISC to sponsored workers, either directly or indirectly. Attempting to do so may result in the revocation of the sponsor licence.

As a result, it is the employer, not the sponsored worker, who will bear the full impact of the proposed fee increase.

How will this impact the cost of an application?

The proposed increase to the ISC is consistent with the broader direction set out in the White Paper, which seeks to significantly reduce net migration. In this context, the proposed increase may be viewed as a financial deterrent to employers considering the sponsorship of overseas workers.

Using the earlier example of sponsoring a Skilled Worker until they are eligible for settlement in the UK, the financial impact becomes particularly pronounced. In addition to raising the ISC, the white paper also proposes extending the qualifying period for settlement under the Skilled Worker route from five to ten years. As a result, for a large sponsor, the total ISC payable across this period would rise to £13,200, assuming no further increases in the next decade. This represents an additional cost of £8,000 compared to the current five-year route to settlement, without accounting for other associated fees, such as the visa application fee, the Immigration Health Surcharge or the Certificate of Sponsorship assigning fee - many of which may fall either wholly or partially on the employer.

These cumulative costs risk making sponsorship a significantly more expensive and, for some employers, potentially unviable option. The increase may act as a disincentive to recruit from abroad, effectively encouraging employers to prioritise domestic hiring instead. While the aim of reducing net migration is clear, the financial burden placed on sponsoring employers raises important questions about long-term labour market strategy, particularly in sectors facing persistent skills shortages.

The value of the policy

The value of the ISC should not be assessed solely from the perspective of sponsoring employers; it also warrants examination from the standpoint of another key stakeholder - the Home Office themselves.

In the White Paper, the Home Office have stated that the increased ISC fees will be used to ‘support skills funding for priority sectors to upskill the domestic workforce and reduce reliance on migration over the medium term’. However, this proposal is at odds with the broader intent of the white paper – significantly reducing net migration in the UK. 

If the overarching goal is to discourage applications and sponsorship through higher costs, a paradox emerges: although the fee increase per individual may be substantial, a sharp reduction in applications would naturally lead to a decline in overall revenue. This creates a question of diminishing returns: how effective can the ISC be as a funding mechanism for domestic skills development if fewer employers are using the system?

Furthermore, the success of this policy hinges not only on reducing reliance on migrant labour, but also on ensuring robust investment in the domestic workforce. If the government intends to restrict access to international talent, it must simultaneously create meaningful incentives and provide substantial resources to support domestic recruitment and training. Without such parallel measures, there is a risk of creating a skills gap - a labour market vacuum that the current domestic workforce may not be equipped to fill in the short to medium term.

Final Thoughts

The proposal to increase the ISC is not a legislative change at this point, and may ultimately not be implemented. However, it highlights the efforts of the Home Office to reduce net migration into the UK by increasing the cost burden on sponsoring employers. 

A key concern is that this objective appears to sit in tension with other proposals outlined in the White Paper, raising questions about the overall coherence of the government’s strategy. Deterring sponsorship without a robust, parallel investment in developing the domestic workforce may risk unintended consequences for the UK labour market, particularly in sectors already facing significant skills shortages.

It is therefore crucial that the Home Office provides greater transparency regarding the intended outcomes of this proposed increase, including how any additional revenue will be allocated. In addition, the Labour government should present a comprehensive plan detailing how it will support the upskilling of the domestic workforce to reduce long-term reliance on migration in a sustainable and inclusive manner.

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