Key takeaways
Budget announcements favour high-skilled recruitment
Budget reforms expand routes for highly skilled talent.
Salary thresholds remain under pressure
Lower visa thresholds offset by higher salary requirements.
Employers should review 2027 hiring plans
PhD discount removal may increase recruitment costs.
The Budget included a number of significant immigration announcements, accompanied by the government’s commitment to create "the most pro-business migration system in Europe for high-skill workers".
Some of these measures are likely to be welcomed by employers and sponsors. Others could create additional challenges. We’ve rounded up the key immigration developments and what they could mean for businesses.
Key measures
The Sponsorship Fee tax fix
The Immigration Skills Charge (ISC) and Certificate of Sponsorship (CoS) fee will not be treated as a taxable benefit in kind for the worker, for payments made on or after 28 October 2026.
It ends a long-running grey area. Sponsors have to pay these costs, yet there was uncertainty over whether doing so created a taxable benefit for the employee. HR and payroll teams should check how they've been treating these payments and align with the new position for anything paid from Budget Day. It still needs Finance Bill 2026–27 to pass, but it will apply from 28 October 2026. The Budget only referenced the ISC and the CoS fee, so other immigration costs you pay for employees are not covered.
Salary thresholds move to the 25th Percentile
From spring 2027, occupation-specific going rates drop from the median to the 25th percentile of wages, following the Migration Advisory Committee's recommendations. The Budget pitches this as making visa criteria reflect labour market conditions across the whole UK.
A national median is pulled up by London and the Southeast, which has long made some roles hard to sponsor in the regions. A lower going rate could bring roles that currently fail on salary back into play, particularly for employers in the North, the Midlands, Scotland, Wales and Northern Ireland. It may also ease pressure at extension stage for existing sponsored workers.
Rising general salary thresholds
From spring 2027, occupation-specific salary thresholds for work visas will fall from the median to the 25th percentile of wages, in line with recommendations from the Migration Advisory Committee. The government says this will make salary requirements more reflective of labour market conditions across the whole UK.
A sponsored worker generally has to be paid the higher of the going rate and the general threshold. If going rates fall, the general threshold rises, the general threshold becomes the number that decides it for many roles. Therefore, the real saving depends on the figures, which we don't have yet. Annual uprating also means salary requirements will move every year, so sponsored workers' pay must be reviewed at every extension and pay review, not just at hiring stage.
The end of the PhD discount
The PhD discount is being removed. New entrant discounts survived, but it will be levelled into a single figure for those studying, recently graduated or in professional training.
Therefore, research, life sciences, engineering and tech employers who rely on the PhD discount to sponsor specialist hires will need to budget for higher salaries or check whether the new entrant discount could apply instead. If you have PhD-level hires in the pipeline for 2027, it is worth looking at the timing now. A single new entrant figure should make graduate hiring simpler, but it is not yet clear on how generous it will be.
Six months' curtailment
The government plans to extend the visa curtailment period to up to six months for the highest-skilled sponsored workers, allowing them more time to find alternative employment if their current role ends. This could help employers retain access to highly qualified talent already in the UK and reduce the risk of losing valuable workers due to tight immigration deadlines.
While the proposal may reduce pressure on both employers and employees, it would also create a pool of experienced, skilled talent already present in the UK. However, this protection is limited to a select group of workers identified as "highest skilled" and "highly paid", terms that have yet to be defined.
The High Potential Individual (HPI) expansion
The HPI route is an unsponsored route, so employers can hire eligible graduates without a sponsor licence. A wider list of eligible institutions widens that cost-free talent pool, especially for graduate schemes and early-career hiring. There's no start date yet, and the cap means places won't be unlimited. It was also announced that the government is expanding this visa route to the top 150 global institutions and there will be a proportional increase to the cap under this scheme.
The Two-Year Graduate visa
The government will restore the Graduate visa to two years, reversing the planned reduction to 18 months. However, this will only be available to graduates from “high-compliance universities with strong labour market outcomes”.
For employers, a two-year Graduate visa provides a longer period to assess and retain graduate talent before deciding whether to invest in Skilled Worker sponsorship and delaying sponsorship costs. The government has not yet identified which universities will qualify and until the list of eligible institutions is confirmed, employers may find it difficult to factor the change into their recruitment and workforce planning.
The Global Talent visa
The government is continuing to expand the Global Talent visa's endorsed funder pathway, building on changes introduced since Budget 2025 that have enabled more than 100 R&D-intensive businesses to support leading scientists and engineers to come to the UK. The next step is for UK Research and Innovation (UKRI) to identify additional R&D-intensive businesses in Industrial Strategy sectors across the UK's regions that could become host organisations by spring 2027.
For employers, this is a targeted attempt to make it easier for innovative businesses to access global talent without relying on traditional sponsorship routes. The Global Talent visa remains one of the UK's most attractive immigration pathways because individuals are not tied to a sponsoring employer and can move more freely within the labour market. R&D-intensive businesses, particularly those in priority Industrial Strategy sectors and outside London, may want to explore whether they could participate in the endorsed funder pathway. For qualifying businesses, that’s a bigger talent pool and a potential hiring advantage. This also signals the government’s intention to strengthen the UK’s offer to high skilled talent, while maintaining tighter controls elsewhere in the immigration system.
Other items
The other related items were:
£150 million in 2027–28 for additional large asylum accommodation sites; and
The UK will participate in the Erasmus+ study scheme for 2027, from 1 January 2027.
Our view
Budget 2026 represents a change of tone rather than a wholesale reset of the immigration system.
Practical next steps
While many of the changes still require further detail or updates to the Immigration Rules, there are practical steps employers can take now to prepare.
Check your payroll treatment of ISC and CoS fees for payments made on or after 28 October 2026.
Identify hires relying on the PhD or new entrant discounts and plan for the change.
Engage with your graduate recruitment team about the HPI expansion and the two-year Graduate visa.
Keep right to work checks front of mind. The expanded regime that started on 1 October 2026 still applies to workers, sub-contractors and online matching services, whatever the Budget says. Please refer to our earlier article for more information.
Our Employment, Education and Immigration team can help with sponsor licence reviews, salary threshold planning and right to work compliance. Contact us to discuss how we can support your business.
