Among a raft of Autumn Budget measures analysed by immigration law firm OTS Solicitors on 30 October 2026 is a change that will please UK sponsors: employer payments of the Immigration Skills Charge (ISC) and Certificate-of-Sponsorship (CoS) fee will no longer be treated as a taxable benefit in kind for employees. The proposal, confirmed in HMRC’s Overview of Tax Legislation and Rates (OOTLAR), applies to payments made on or after 28 October 2026 and will be legislated for in Finance Bill 2026-27. Currently, when an organisation pays the ISC (£1,000 per sponsored worker per year for most large employers) or the £239 CoS fee, HMRC may view the outlay as a benefit to the worker, triggering Pay-As-You-Earn tax and National Insurance on the grossed-up amount. The forthcoming exemption removes that liability, aligning the tax treatment with visa-application fees (already tax-free) and reducing administrative complexity. For HR and finance teams the change simplifies payroll reporting and marginally lowers total sponsorship cost. A company sponsoring a five-year Skilled Worker currently incurs up to £5,000 in ISC; treating that as a benefit can add more than £2,500 in gross-up costs for a higher-rate taxpayer. From now on, only the headline Home Office charges hit the budget. The measure also removes a long-standing anomaly that discouraged some firms from covering sponsorship costs. By clarifying tax neutrality the government hopes to encourage more employers—particularly SMEs—to hire international talent legitimately rather than relying on gig-economy arrangements outside the sponsorship system. Sponsors should note that the ISC itself remains payable and that other immigration-related reimbursements, such as relocation allowances or private medical insurance, continue to attract normal benefit-in-kind rules. Payroll software will need updating once Finance Bill 2026-27 receives Royal Assent, expected in Spring 2027.
Source: OTS Solicitors / HMRC OOTLAR
