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The UK government has introduced significant changes to work sponsorship rules and tax policies in 2025, impacting businesses reliant on overseas talent.
These changes primarily involve increased National Insurance Contributions (NICs), employer taxes, and revised guidance on sponsorship costs.
The Labour Government’s key Tax and NIC increases which have been proposed to take effect from April 2025 will impact recruitment in the following ways:
Employers who sponsor overseas workers face higher operational costs, adding to existing financial burdens (e.g., visa fees, Immigration Skills Charge).
Large organisations may absorb these costs, but small and medium-sized businesses will struggle.
Some businesses may opt for alternative strategies, including:
Investing in domestic workforce development
Automation of certain roles
However, skills shortages persist, especially in healthcare and tech sectors, maintaining demand for overseas talent.
This begs the question as to whether these increased costs will force businesses to rethink their reliance on international workers, and what alternatives are viable for businesses moving forward.
Although talks over the years have alluded to the upskilling of UK based talent, this is not always going to be possible, especially within those industries which are lacking the skills and require immediate resource.
In addition to the above, the UK government has made substantial updates to employer responsibilities and cost allocations, effective January 2025.
Below is a breakdown of the types of costs which can be expected and which of these can be forwarded to the employee to cover:
Employer costs:
Sponsorship Licence Application Fees
Certificate of Sponsorship Fees
Immigration Skills Charge
Sponsor Duties & Compliance Costs
Clawback Costs (if applicable, but now limited)
Employee costs:
Visa Application Fees
Immigration Health Surcharge (IHS)
Biometric Enrolment Fees
In January 2025, UKVI announced new employer compliance measures, in which employers are now prohibited from passing sponsorship costs onto employees. Attempting to do so could result in their sponsor licence revocation.
Where clawback agreements are in place (where employers recover visa costs from employees who leave early), these must be structured carefully to remain legally enforceable, and the onus remains on businesses to review their policies and seek legal advice to ensure compliance.
As enticing as it may be to work and live in the UK, these restrictions on cost recovery will inevitably discourage businesses from hiring overseas workers, however, time and again, the demand for skills has proven to outweigh the demands placed on businesses as sponsor licence holders.
The combination of tax hikes and stricter sponsorship regulations creates a challenging landscape for UK businesses reliant on international workers. Employers must adapt strategically, whether by absorbing costs, investing in domestic training, or refining their hiring policies, to maintain compliance and workforce stability.
If you are a business owner struggling to navigate these regulatory changes, we recommend seeking the appropriate legal and immigration advice.
Contact us today to discuss which strategies would be most suited to your business operations on 0808 172 93 22 or complete our quick contact form for a no obligation discussion!
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This update is for general guidance only and advice should be taken in relation to a particular set of circumstances.
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