Budget 2026: What the Immigration Announcements Mean for Employers, Skilled Workers and Graduates
A change of tone, but not yet a change of law
Chancellor John Healey delivered the Budget on 28 October 2026 with a promise to build "the most pro-business migration system in Europe" for highly skilled workers. After two years of rising salary thresholds, higher fees and shorter visas, that is a marked change of tone.
It is important to be clear about what the Budget is. It is a statement of government policy, not a change to the Immigration Rules. Implementation will require changes to the Rules, published guidance or administrative arrangements, depending on the measure. A change to the Rules that has been laid before Parliament applies only from its commencement date. Until each measure is brought into effect, the current rules and guidance continue to apply.
Headline announcements
- Salary thresholds: occupation-specific going rates are to fall from the median wage to the 25th percentile from spring 2027. The £41,700 general threshold stays and will be uprated.
- New entrants: a single new entrant figure will replace the separate discounts, and the PhD discount will go.
- Losing a sponsor: the highest skilled workers are to have up to six months to find a new sponsor, planned for 2027.
- Graduate visa: two years will be kept for graduates of high-compliance universities. Other non-doctoral graduates receive 18 months on applications from 1 January 2027.
- High Potential Individual visa: eligibility is to widen to graduates of the top 150 global institutions.
- Sponsorship costs: employer-paid Immigration Skills Charge and CoS fees are not to be taxed as a benefit in kind, for payments from 28 October 2026.
The rest of this article explains each proposal, the present position, the likely timing and the practical steps we recommend.
The announcements at a glance
| Measure | Position today | What the government proposes | Timing |
|---|---|---|---|
| Skilled Worker going rates | Standard rates set at the median wage for the occupation, subject to exceptions | Reduced to the 25th percentile | Spring 2027 |
| General salary threshold | £41,700 standard rate, subject to exceptions | Uprated using 2026 wage data, then updated every year | Spring 2027 |
| New entrant and PhD discounts | Several separate discounts | One new entrant figure; PhD discount removed | Spring 2027 |
| Time to find a new sponsor | Normally 60 days remaining following cancellation, subject to the circumstances and existing expiry date | Up to six months for the highest skilled workers | 2027 |
| Graduate visa | Two years, falling to 18 months for non-doctoral applications from 1 January 2027; three years for doctoral graduates | Two years kept for graduates of high-compliance universities with strong labour market outcomes | Not announced |
| High Potential Individual visa | Limited list of eligible overseas universities | Top 150 global institutions, with a proportional rise in the cap | Not announced |
| Global Talent visa | Endorsed funder pathway open to selected R&D businesses | More R&D-intensive businesses to be identified as host organisations | By spring 2027 |
| Tax on sponsorship costs | Treatment was uncertain | Employer-paid Immigration Skills Charge and CoS fees not a taxable benefit in kind | Payments from 28 October 2026, subject to the Finance Bill |
Skilled Worker salary thresholds
The government proposes that, from spring 2027, the standard going rate for an occupation will fall from the median wage to the 25th percentile. This is the most significant of the announcements for sponsors.
A Skilled Worker must be paid the higher of two figures: the general salary threshold and the going rate for the occupation code. Those are the standard Skilled Worker salary requirements. Lower figures apply in defined cases, including new entrants, workers with transitional protection and certain healthcare and education roles. In April 2024 the previous government raised going rates from the 25th percentile to the median. The Migration Advisory Committee (MAC) reviewed that decision and, in its letter to the Home Secretary of 17 December 2025, recommended a return to the 25th percentile. The Budget accepts that recommendation.
Three points should temper expectations:
- The general threshold is not being cut. The standard rate stays at £41,700 until the rules change and will then be uprated using 2026 wage data. The MAC recommended keeping it at £41,700.
- Not every role will become cheaper to sponsor. Where the going rate is already below the general threshold, the general threshold continues to set the minimum salary. The benefit falls mainly on occupations with going rates above £41,700 and on workers who qualify for a discounted threshold.
- Thresholds will move every year. The Budget commits to annual updates using Office for National Statistics earnings data (ASHE). Sponsors will need to check salaries at each extension, not only at the point of hire.
The Home Office confirmed in a written parliamentary answer of 4 November 2026 that further details and impacts will be shared in due course. No figures have been published.
New entrants and the PhD discount
The government proposes to replace the separate new entrant discounts with a single figure and to remove the PhD discount.
The new entrant concession currently allows a lower salary for applicants who are under 26, recent Student or Graduate visa holders, or working towards a recognised professional qualification. The Budget says these discounts will be levelled into one figure for those studying, recently graduated or in professional training.
The Budget does not give the figure. The MAC recommended a single new entrant rate of £33,400, set so that a typical graduate entrant can be recruited through the sponsorship system. Whether the Home Office adopts that number, and how long a worker may rely on it, will only be known when the rules are published.
The MAC found no evidence that PhD holders earn less than the average worker and recommended abolishing their discount. Employers who rely on the PhD discount, particularly in research and technical roles, should check whether those salaries will still qualify once it goes.
Up to six months to find a new sponsor
The government proposes a cancellation period of up to six months for the highest skilled workers, with implementation planned for 2027.
At present, when a sponsored worker's employment ends, the sponsor reports it and the Home Office will normally consider cancelling the worker's permission to leave 60 days, where appropriate. The period can differ, is fixed by the cancellation notice and cannot extend the existing permission. In the time allowed the worker must find a new sponsor and apply again, switch to another route or leave the UK. Sixty days can be a short period in which to secure a qualifying role.
The detail matters, and most of it is missing:
- The Budget does not define "highest skilled". Commentators expect a salary test, although that is speculation at this stage, so the change is unlikely to help every Skilled Worker.
- The period is described as "up to" six months. The Budget itself indicates that the length will vary with how long the person worked in the previous highly paid job.
- In one passage the Budget says the government "will allow" the longer period. In another it says it will "work towards" it. The firmness of the commitment is therefore open to question.
Until the proposal is implemented, anyone whose sponsored employment ends should seek advice promptly and check the expiry date and any cancellation notice carefully.
The Graduate visa: a reprieve for some
The government proposes that graduates of high-compliance universities with strong labour market outcomes will keep a two-year Graduate visa. Other non-doctoral graduates remain on course for 18 months, and doctoral graduates keep three years.
The Statement of Changes of 14 October 2025 (HC 1333) already provides that Graduate visa applications made on or after 1 January 2027 will be granted for 18 months instead of two years. Doctoral graduates are unaffected and continue to receive three years. That rule is made and will take effect unless amended.
The Budget proposes an exception, but leaves three questions unanswered:
- What makes a university "high-compliance"? The phrase suggests a link to the sponsor compliance metrics that universities must already meet, but no test has been published.
- How will "strong labour market outcomes" be measured, and will the list of qualifying universities be published in advance?
- When will the exception start? No date is given. To avoid a gap, the exception would need to cover eligible applications made from 1 January 2027, when the existing Graduate rules switch non-doctoral applications to 18 months.
Our advice to current students is not to wait. If you are eligible to apply for a Graduate visa before 1 January 2027, do so. Under the current rules, an eligible non-doctoral applicant who applies on or before 31 December 2026 will receive two years' permission if the application is successful, whatever the university. Your university must first have notified the Home Office that you have successfully completed your course.
High Potential Individual and Global Talent routes
The government proposes to open the High Potential Individual (HPI) visa to graduates of the top 150 global institutions, with a proportional increase in the annual cap.
The HPI route allows eligible graduates of overseas universities to come to the UK without a job offer or sponsor. The Home Office's 2026 Global Universities List contains 82 institutions and applies to qualifications awarded between 1 November 2026 and 31 October 2027. Applicants must check the list covering their qualification's award date. The current cap is 8,000 applications per allocation year, running from 1 November to 31 October, under Appendix High Potential Individual. The Budget does not specify the expanded list or its commencement date.
For the Global Talent visa, the change is to the endorsed funder pathway and does not alter the rules for individual applicants. The Budget states that more than 100 R&D-intensive businesses have been brought within the pathway since Budget 2025. UK Research and Innovation will now work with regional organisations to identify further businesses in Industrial Strategy sectors to act as host organisations by spring 2027.
Tax treatment of sponsorship costs
The government proposes that an employer's payment of the Immigration Skills Charge or the Certificate of Sponsorship (CoS) fee will not be treated as a taxable benefit in kind for the worker.
This is the one measure with an announced effective date that has already passed. It is to apply to payments made on or after 28 October 2026, subject to legislation in the Finance Bill 2026-27. Garth Coates Solicitors point out that it is the date of payment that counts, not the date of the visa application, and that other immigration costs met by an employer remain subject to the normal tax rules.
The change does not alter the immigration position. A sponsor still cannot pass the Immigration Skills Charge on to the worker and, for Skilled Workers, must also pay the CoS fee itself where the certificate was assigned on or after 31 December 2024. The amounts payable are unchanged. Employers with questions on payroll treatment should speak to their accountant or tax adviser.
What has not changed, and what we do not yet know
No application made today benefits from any of the visa measures in the Budget. The position shown in the table above continues to apply until each measure is brought into effect.
The following points remain open:
- the exact date in spring 2027 on which the new salary rules will start, and the transitional provisions for workers already sponsored;
- the uprated general threshold and the new going rate for each occupation code;
- the single new entrant figure and the conditions attached to it;
- who counts as one of the "highest skilled workers" for the six-month curtailment period;
- the criteria and start date for the two-year Graduate visa exception;
- the list of 150 institutions for the HPI route and the new cap.
No changes to visa fees or the Immigration Health Surcharge were announced. The Budget also sits alongside the government's wider programme of restriction, including the reforms to settlement. A more generous salary rule does not mean a more generous system overall.
Practical steps
Sponsors and employers
- Do not change salary offers or assign Certificates of Sponsorship on the strength of the Budget. Continue to meet the applicable salary and sponsorship requirements, and check the commencement and transitional provisions when the changes are published.
- Identify roles that fail today only because of the median going rate. These are the roles most likely to become sponsorable in spring 2027.
- Review any sponsored worker paid on the PhD discount or a new entrant rate, and plan for the next extension.
- Build an annual salary review into your sponsor compliance calendar, since thresholds will be updated each year.
- Speak to your tax adviser about Immigration Skills Charge and CoS payments made on or after 28 October 2026.
Sponsored workers
- If your sponsored employment ends, seek advice promptly. The Home Office will normally consider cancelling your permission to leave 60 days, where appropriate, but the period can differ and cannot extend your existing permission. Check the expiry date and any cancellation notice carefully. The proposed six-month period is not yet available.
- If an extension is due before spring 2027, your salary must meet the current thresholds.
Students and graduates
- If you can make a valid Graduate visa application on or before 31 December 2026, do so. A successful non-doctoral applicant will receive two years. Under the current rules, successful doctoral applicants receive three years.
- If you will graduate in 2027, do not assume your university will qualify for the two-year exception until the criteria are published.
- Overseas graduates considering the HPI route should check the current eligible list. The longer list is not yet in force.
How Morgan Hill Solicitors can help
Our immigration team advises employers on sponsor licences, salary compliance and Certificates of Sponsorship, and advises individuals on Skilled Worker, Graduate, High Potential Individual and Global Talent applications. We will update this article when the implementing rules and guidance are published.
To discuss how these announcements affect you or your business, call our Head Office on +44 203 5000 699 or contact us through our website.
About the author
Rao Manzoor-ul-Haque Khan, LL.M. (Glasgow), is Principal Solicitor and Managing Director of Morgan Hill Solicitors. He is a Solicitor of England and Wales, an Advocate of the High Court (Pakistan) and a Member of Lincoln's Inn, with more than 24 years of multi-jurisdictional post-qualification experience.
This article reflects the position as at 12 November 2026. It is general information and not legal advice. The measures described are announcements of policy and may change before they are implemented. Please take advice on your own circumstances before acting.
Sources
- Budget 2026, HM Treasury, 28 October 2026
- MAC letter to the Home Secretary on the 2025 annual report and salary requirements report, 17 December 2025
- Written question 40092, Home Office answer of 4 November 2026
- UKCISA, Student update: changes to the Student and Graduate rules (Statement of Changes HC 1333, 14 October 2025)
- Home Office, Cancellation and curtailment of permission: caseworker guidance
- Immigration Rules, Appendix Graduate
- Home Office, Sponsor a worker: sponsor guidance part 2 (sponsor to bear the CoS fee and Immigration Skills Charge)
- Home Office, High Potential Individual visa: Global Universities List 2026
- Immigration Rules, Appendix High Potential Individual
Commentary relied on for interpretation:
