Policy paper

Income Tax: immigration skills charge and certificate of sponsorship fees

Published 28 October 2026

Who is likely to be affected 

Employers who sponsor employees or prospective employees under the Skilled Worker route, and the individuals they sponsor.  

General description of the measure 

This measure introduces an Income Tax exemption for an employer’s payment of the immigration skills charge and the certificate of sponsorship fee when sponsoring an employee or prospective employee under the Skilled Worker route. It will prevent an Income Tax charge arising for the individual on the value of the charge or fee paid by their employer.  

This improves consistency in the tax system by aligning the tax and National Insurance contributions treatment of immigration skills charge and certificate of sponsorship fees with the treatment of other mandatory employment-related costs that employers must bear and cannot recover from employees. 

The exemption will apply whether or not the individual has started their employment when the fees are paid, and whether or not their subsequent visa application is successful. 

The exemption is limited to the immigration skills charge and the certificate of sponsorship fee. Other immigration-related costs remain subject to the normal tax rules that apply to those expenses.  

Policy objective 

The objective of the measure is to provide a clear and consistent tax treatment for the mandatory charges employers must pay when sponsoring workers under the Skilled Worker route. 

The exemption will ensure that the immigration skills charge and the certificate of sponsorship fee can be paid by employers without creating an Income Tax charge for the sponsored individual or a Class 1A National Insurance contribution charge for the employer. 

Background to the measure 

The immigration skills charge and the certificate of sponsorship fee are mandatory charges that employers must pay when sponsoring workers under the Skilled Worker route. Employers are not permitted to recover these charges from the sponsored worker. 

Before this measure, there was no specific Income Tax exemption for these payments. An existing exemption for certain relocation costs could apply in some circumstances, but this did not cover all sponsored employees, including some individuals already in the UK. 

At Budget 2026, the government announced that a specific exemption would be introduced for these charges. 

Detailed proposal 

Operative date 

The measure will have effect for payments made on or after 28 October 2026.  

Current law  

Current law on employment related benefits is contained in Part 3 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA). 

Chapter 10 of Part 3 contains the residual charge on employment related benefits. 

Current law on the National Insurance contributions treatment of these benefits is included in the Social Security (Contributions and Benefits) Act 1992 and the Social Security (contributions) Regulations 2001. 

Proposed revisions 

Legislation will be introduced in Finance Bill 2027 to amend Part 3 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA). 

The legislation will insert a new section 326C into ITEPA which will provide that no liability to Income Tax arises where an employer pays: 

• an immigration skills charge

• a certificate of sponsorship fee 

in respect of an employee or prospective employee sponsored under the Skilled Worker route. The terms ‘certificate of sponsorship’ and ‘immigration skills charge’ will be defined by reference to the Immigration Skills Charge Regulations 2017. 

The exemption will apply irrespective of whether the individual has started their employment when the relevant fee is paid and whether their subsequent visa application is successful. 

The exemption will be limited to the immigration skills charge and the certificate of sponsorship fee. It will not extend to sponsor licence fees, visa application fees, the Immigration Health Surcharge or any other immigration related costs. 

The changes to ITEPA will apply to National Insurance contributions without the need for specific National Insurance contributions legislation as in order for a Class 1A charge to arise, there must be a charge to income tax. 

Summary of impacts 

Exchequer impact (£ million) 

2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030	2030 to 2031	2031 to 2032
negligible	negligible	negligible	negligible	negligible	negligible

This measure is expected to have a negligible impact on the Exchequer.  

Economic impact 

This measure is not expected to have any significant macroeconomic impacts. 

Impact on individuals, households and families 

This measure will have a positive impact on individuals whose employer pays the immigration skills charge or certificate of sponsorship fee in respect of them. It will prevent an Income Tax charge arising for the individual solely because their employer has paid these mandatory sponsorship costs. 

The measure is not expected to impact these individuals’ experience of dealing with HMRC, as they will not need to take any action to benefit from the exemption. 

This measure is not expected to affect family formation, stability or breakdown. 

Equalities impacts 

This measure will affect individuals sponsored by their employer under the Skilled Worker route. HMRC does not currently hold data on the other protected characteristics of individuals impacted by this measure, but the affected population is likely to include a higher proportion of individuals of working age and of non-UK national origin than the wider population.  

The measure will prevent an Income Tax charge arising where an employer pays the immigration skills charge or certificate of sponsorship fee in respect of an individual sponsored under the Skilled Worker route. 

No adverse impacts on groups sharing protected characteristics have been identified. 

Administrative impact on business including civil society organisations 

This measure is expected to have a negligible administrative impact on businesses, by ensuring that they can pay the immigration skills charge and certificate of sponsorship fee without creating an Income Tax charge for the sponsored individual. 

One off costs will include familiarisation with the change and updating payroll or benefits processes where employers currently report the immigration skills charge or certificate of sponsorship fee as a taxable benefit. 

There are not expected to be any continuing administrative costs. Employers that currently report these payments may experience a small continuing administrative saving because they will no longer need to report them as taxable benefits. 

The measure will affect employers that sponsor workers under the Skilled Worker route, including employers in the public, private and civil society sectors. The measure is not expected to have a disproportionate impact on small and micro businesses. 

Customer experience is expected to remain broadly the same because the measure does not introduce a new reporting requirement. Guidance will be updated to help employers understand which payments qualify for the exemption and when the change takes effect. 

Operational impact (£ million) (HMRC or other) 

There will be no operational impacts on HMRC of implementing and operating this tax exemption. 

Other impacts 

Other impacts have been considered and none have been identified. 

Monitoring and evaluation 

Consideration will be given to monitoring and evaluating the exemption, including whether it provides clear and consistent tax treatment for affected employers and sponsored workers, after an appropriate period of payroll, compliance and stakeholder evidence has been collected and analysed. 

Further advice 

If you have any questions about this change, contact the Benefits and Expenses Policy Team by email policyemploymentbenefitsexpenses@hmrc.gov.uk.