Immigration Skills Charge Budgeting begins as a topic that prompts sponsors to look closely at how the Immigration Skills Charge (ISC) shapes their financial planning for overseas recruitment. It’s the kind of subject that naturally makes employers pause, run the numbers twice, and think about how each Certificate of Sponsorship interacts with wider budgeting cycles, recruitment pipelines and internal cost-approval processes. It opens the door to questions about how organisations pace their hires, model different timelines and decide when to absorb costs or when to restructure them across departments — all while keeping an eye on the shifting landscape of sponsorship obligations and employer-focused charges
Understanding the Immigration Skills Charge (ISC)
The Immigration Skills Charge (ISC) is a mandatory cost for organisations that hold a sponsorship licence under the Skilled Worker route (and other related routes) and assign a Certificate of Sponsorship (CoS) to a migrant worker.
Its purpose is two-fold: firstly, to encourage UK employers to invest in training the resident workforce rather than relying purely on overseas labour; and secondly, to generate revenue to support UK-skills investment.
From a budgeting perspective, the ISC is a significant upfront cost — it must be paid when the CoS is assigned (and before the visa application).
Exemptions: Who Does Not Pay the ISC?
Understanding exemptions is critical in budget modelling because it can make a substantial difference in cost planning.
Key exemption categories include:
- Workers with occupation codes that cover higher-education teaching professionals, certain researchers and scientists.
- Workers switching from a student visa route (for example, those who held “valid permission for study”) to a Skilled Worker route in the same role and same sponsor may be exempt.
- Dependants of the sponsored worker are not subject to the ISC.
- The ISC does not apply to other Worker or Temporary Worker routes that aren’t Skilled Worker or Senior/Specialist Worker routes.
For sponsors, it is crucial to carefully identify whether a particular assignment is exempt — misclassification can lead to unbudgeted costs or non-compliance.
Refund Triggers
The ISC is usually non-refundable for the first 12 months of sponsorship, but under certain circumstances, sponsors may receive either full or partial refunds. It is vital for budgeting and cash-flow planning to understand these triggers.
Full Refunds
You are eligible for a full refund if:
- The worker’s visa application is refused, withdrawn, or no application is made based on the CoS.
- The sponsored worker never commences employment under the CoS.
Partial Refunds
You may receive a partial refund in cases such as:
- The visa is granted for a shorter duration than the CoS indicated (after the first year).
- The worker leaves the role early (after the first year) due to ill-health, redundancy, dismissal (in certain cases).
- The employer’s size or charitable status changes (for example, from large to small) after assignment of the CoS, and this is notified to UKVI.
Non-Refundable Situations
No refund is available, for instance, when:
- The worker changes jobs but remains with the same employer in the same role.
- The sponsor’s licence is made dormant or revoked.
Understanding these refund mechanics is essential when projecting the net cost of sponsorship over multi-year periods.
Budgeting for Different Sponsorship Scenarios
Effective budgeting for the ISC requires modelling of different sponsorship durations, since the charge is payable upfront for the length of the certificate of sponsorship (CoS).
6-Month Assignment
Although the ISC applies only when the stay is 6 months or more, if assigning for 6 months, sponsors still must pay the full 12-month rate because the charge covers a minimum period of at least the first year.
For example:
- A small sponsor assigns a CoS for 6 months → charge = £364.
- A medium/large sponsor is assigned for 6 months → charge = £1,000.
Because the duration is under 12 months, the full yearly rate applies.
24-Month Assignment
For a two-year assignment (24 months):
- Small/charitable sponsor: £364 for first 12 months + £182 for additional 12 months (2 × £182) = £728.
- Medium/large sponsor: £1,000 for first 12 months + £500 for additional 12 months (2 × £500) = £2,000.
This allows sponsors to project and lock in the cost when the CoS is issued.
60-Month (5-Year) Assignment
Many Skilled Worker visas allow up to 5 years (60 months). Using the current rate:
- Small/charitable sponsor: £364 × 5 = £1,820.
- Medium/large sponsor: £1,000 × 5 = £5,000.
Sponsors need to bear the full upfront cost, but can factor in potential refunds if early termination occurs. (Figures reflect current pre-December 2025 rates).
Cash-Flow & Budget Planning Best Practices
Managing the ISC cost effectively requires more than simply knowing the charge; it demands sound planning:
- Include ISC in upfront hiring costs: Because the sponsor must pay at the point the CoS is assigned, ensure ISC is factored into initial budgeting and financial approval before appointing overseas staff.
- Scenario-model costs: Use 6-, 24- and 60-month models (as above) to understand maximum costs and election for shorter or longer assignments.
- Track likely refund events: While refunds are not guaranteed, modelling worst-case (no refund) versus best-case (refund event) allows you to build flexibility.
- Monitor licence size status: If your organisation changes size (small to large, or obtains charitable status), it could affect future ISC rates or refund eligibility. Informing UKVI promptly can yield refunds or avoid extra costs.
- Time the CoS assignment wisely: Given the rate increase scheduled for mid-December 2025, consider whether assignments can be issued earlier in the financial year to lock current rates, or budget for the expected increase.
- Fully cost-recover or evaluate hire: Knowing ISC is a significant overhead, sponsors should evaluate return on investment for international hires, factoring ISC plus visa fees, healthcare surcharge, onboarding, etc.
- Incorporate ISC into compliance checks: Ensure your finance team and immigration/compliance team coordinate so the ISC payment is made on time (non-payment invalidates the CoS) and is recorded appropriately.
Compliance Risks & Budget Impact
Failure to pay the ISC when required leads to significant risks: the CoS will be invalid, a worker’s visa application may be refused, and your sponsor licence may come under scrutiny.
From a budgeting standpoint, you must treat ISC as a non-flexible upfront cost once the CoS is assigned. Late refunds or no refunds at all must be anticipated in your risk modelling.
What’s New or Changing?
Several key developments are shaping how sponsors need to budget:
- The upcoming increase in ISC rates means that while FY2025/26 may still allow the current rate for many assignments, budgets should include the potential higher cost if CoS assignments cross the date.
- Official guidance updates on refunds and compliance published mid-2025 emphasise the triggers and time-limits for refund consideration.
- The expanded focus on training the UK-resident workforce (via ISC income) means sponsors may face stronger queries on whether overseas hires are genuinely necessary and cost-justified.
Conclusion!
For any organisation holding a sponsor licence, the ISC is a major budgetary item in FY2025/26. It is not simply a fee, it is a strategic cost that affects hiring decisions, cash-flow planning, staffing budgets and investment in overseas talent. By understanding the current rates, exemptions, refund mechanisms and scenario modelling, sponsors can turn what appears to be a complex obligation into a controlled and predictable expense.
If you are seeking to manage your sponsorship costs effectively, ensure compliance and optimise your international hiring strategy — keep monitoring updates on the ISC and other sponsor duties via SponsorLicenceHub.com.
