How tightened immigration rules could impact UK companies in 2026

The measures, introduced in the government’s ‘Restoring Control’ immigration white paper in May, comes as the UK wrestles with the increasingly heated debate on immigration which is likely to cast a long shadow over next year’s local elections in England, the Scottish parliamentary elections and elections to the Welsh Senedd – and they are likely to continue to influence the debate in the coming months.

For employers in particular, understanding the impact of the new visa changes will be essential if they are looking to utilise workers from overseas to strengthen their workforce.

Sponsorship of skilled workers

Immigration rules were updated on 22 July, increasing both salary and skills requirements and limiting eligible roles, predominantly for skilled worker visas. These changes impact both junior staff and experienced workers, leading to uncertainty for sponsored employees and greater demands on employers for guidance.

Different salary and skill thresholds apply based on when a skilled worker’s sponsorship began – be it before 4 April 2024, before 22 July 2025, or after. Workers who have maintained continuous sponsorship since before April 2024 are subject to lower salary requirements and have access to a wider range of occupation codes when extending their status or changing sponsors. Individuals applying for sponsorship for the first time must meet stricter criteria, including holding a graduate-level role, and typically earning a salary above £41,700 – although some discounts apply.

A new temporary shortage list has introduced short-term respite for sponsorship in some “medium skilled” roles but cannot replace strategic planning for hiring in future.

Although new salary thresholds do not apply until a worker extends or updates their visa, many employers are proactively auditing their sponsored workforce to ascertain what salaries their workers need to be paid when extending their status. This helps identify where future salary gaps may arise.

If a sponsored worker cannot meet the new salary requirement by their extension date, or if an employer cannot justify a hire under new rules, they face difficult choices. Employers may raise salaries but must consider fairness. Some employees can switch visa types, but not all are eligible. Early discussions will help employees explore alternatives or seek legal advice.

Maintaining a talent pipeline

The May paper recommends reducing the graduate visa from 24 to 18 months, a move that would impact employer recruitment strategies. While the date of this change is yet to be announced, adjustments often occur quickly, so employers should take steps to prepare now.

The graduate visa allows work in the UK without sponsorship temporarily, and this route helps employers evaluate candidates before deciding on sponsorship. However, just 30% of graduate migrants are currently reported to be working in roles sufficiently skilled to secure sponsorship long-term, and a shorter duration of status reduces assessment time and may make graduate applicants less appealing to employers.

As many UK graduate schemes last two years or more, some applicants may not finish their programmes if the length of this visa is shortened. Employers will need to adjust workforce planning and consider earlier sponsorship if they wish to maintain this talent pipeline into the future.

Avoiding discrimination

Legal changes have introduced new considerations for employers regarding sponsorship eligibility and timing. Employers managing recruitment processes may need to reassess their procedures. While preferring recruitment strategies that are efficient and manageable, employers should be aware of potential legal risks when considering candidates who require sponsorship or whose right to work is not permanent.

The ‘costs plus’ legal principle obliges employers to provide justification beyond financial considerations when undertaking actions that may be perceived as discriminatory, such as declining or terminating employment on the basis of sponsorship. This can be especially challenging if employers encounter situations where numerous highly qualified candidates do not need sponsorship, but the full pool of applicants includes those who do.

If a role genuinely cannot be sponsored, due to salary thresholds or skill level for example, employers should be able to reject applicants requiring sponsorship or exclude them from applying from the outset. In this scenario there is a justification beyond costs: sponsorship legally cannot proceed.

Employers often wish to indicate in job adverts whether sponsorship is available, helping to manage applicant expectations and reduce administrative burdens later. Employers who take this approach should ensure that the role genuinely does not meet sponsorship requirements, but that can be difficult to assess.

Changes to the skilled worker sponsorship route have created a complicated system with different skill and salary thresholds applicable to different applicants. An employer could unwittingly exclude an applicant who could be sponsored, leading to a viable discrimination claim.

When a role is eligible for sponsorship, employers should ideally consider sponsorship and right to work issues at the end of the recruitment process. If a candidate can be rejected for reasons unrelated to sponsorship, this will significantly reduce risk. However, this approach leaves employers to process a considerable number of applicants where sponsorship is unnecessary or undesirable. None of the enacted or proposed legal changes seek to address this issue.

International students and their sponsors

Student sponsors are expected to encounter considerable regulatory changes anticipated for the 2025-26 academic year. Over recent years, the volume of international student applications to UK educational institutions has declined, and forthcoming policies are designed to further reduce these numbers.

Student sponsors must adhere to rigorous compliance standards, including meeting minimum thresholds regarding visa refusal rates, student enrolment, and course completion. These benchmarks are poised to become more demanding, and institutions should proactively assess their compliance protocols and implement necessary improvements: Home Office modelling indicates that 22 higher education sponsors would not have passed compliance reviews in the past year under the proposed metrics.

The introduction of a new international student levy may intensify financial pressures for education providers. The May paper proposes a 6% levy, suggesting this cost may be transferred to students through increased tuition fees. While modelling forecasts a modest decrease in international student numbers, in practice some providers may struggle to recruit if increasing their fees while being unable to absorb these additional costs themselves.

By the end of 2026, a contraction in the number of active student sponsors is possible, driven either by enhanced compliance measures or by voluntary withdrawal from sponsorship activities.

Other changes still to come

The paper sets out several additional forthcoming changes, including:

• a more demanding English language requirement for sponsored workers, as well as the introduction of English language testing for their family members;
• potential modifications to the settlement pathway for sponsored workers, extending the general settlement period from five years to ten years and implementing an "earned settlement" scheme that could permit individuals to qualify for indefinite leave to remain in under ten years;
• a 32% rise in the immigration skills charge payable by sponsoring employers, which will significantly raise sponsorship costs – especially if the sponsorship duration is also extended.

Right to work checking process are also expected to change in the next 12 months, expanding liability for illegal working and altering the steps needed to secure a defence against civil penalty. Employers are encouraged to monitor this issue and those raised above, which have potential to significantly impact legal compliance into 2026.

Co-written by Maria Gravelle, Alex Wright, Alexandra Orr and Megan Dickenson of Pinsent Masons.