UK announces big increases to visa fees

The UK government has announced that application costs for UK visas will increase across the board, which will affect employers and visa applicants and their families. The purpose of the significant rise in application costs is to partly fund public sector pay awards, as the government tries to settle protracted disputes with trade unions over salary and employment terms. The government wants to raise more than £1 billion through increases to visa application fees.

What is changing? 

We expect that exact details will be laid out in regulations in due course, but the headline changes are:

• Immigration Health Surcharge (IHS) to increase from £624 to £1,035 for each year of the visa for adults, and £776 per year for students and under 18s.

• Fees for visit and work visa application fees to rise by 15%.

• Fees for student visas, certificates of sponsorship, settlement, citizenship, and all other visa applications to increase by at least 20%.

• The cost of priority services will be made the same whether applicants apply inside or outside the UK.

The announcement did not cover the Immigration Skills Charge (ISC). The ISC amounts to a sponsor tax payable when employers assign a certificate of sponsorship (COS) and must be paid by sponsors rather than applicants. 

IHS rises 

Although IHS rates have been frozen for the last three years, the big rise in IHS fees will have the greatest impact on overall cost of visa applications, especially for families. Payment of the IHS is a mandatory charge that ensures that applicants have access to free healthcare in the UK through the NHS. It is still payable even if the individual never uses the NHS and even if they have their own private medical insurance cover. Even though it is calculated for each year of the visa, the whole amount is payable upfront as a lump sum at the same time as other visa fees, which makes it difficult for individuals to pay if their employer is not picking up the cost. The government announcement stated that the increase to IHS "will help to fund the pay rise for doctors".

Are there any exemptions to IHS?

Not everyone has to pay the IHS. Anyone applying for a work visa of more than six months must pay it, but several different types of applicants are exempt, including:

• an applicant outside the UK for a visa for six months or less (for example a temporary sponsored work assignment)

• an applicant for a visitor visa

• an applicant for settlement or British citizenship

• an applicant to the EU Settlement Scheme for pre-settled status or settled status.

* Estimated new fee. Exact number is TBC

When will the increases take effect?

There has been no announcement on timing, but the government will want to start pulling in the higher fees quickly. It remains to be seen, but it is a reasonable assumption that Parliament will review the required regulations to implement the increases after its summer recess, with fee increases taking effect in late summer or autumn 2023.

What can employers do now?

In the middle of a cost-of-living crisis, these fee rises will cause a real challenge for individuals and businesses, especially for start-ups and SMEs. What factors should employers be considering now? 

• Encourage anyone planning to apply for a UK visa in the coming months to see if they can accelerate their application to try to take advantage of the existing lower fees before the changes take effect. For example, a worker applying for a 5-year visa will save just over £2,000 in IHS alone if they are able to apply before the increase takes effect.

• Factor in higher costs to recruitment budgets as an increased business cost of hiring the best talent.

• Have a consistent approach on what visa costs the business will cover on behalf of workers. For example, some employers will agree to meet all related visa costs for their employee or candidate but not for accompanying family members. Others will only agree to meet some of the costs for their worker or new hire, but bear in mind that in sponsored cases, it is unlawful to require the applicant to pay for the Immigration Skills Charge, as that is a tax on sponsors.

• If you don’t already, consider the use of clawback agreements, which require the worker to repay a portion of the visa costs if they leave employment within a set period after visa approval. This agreement should be properly drafted by a lawyer, as only agreements that are "reasonable" – and that are not a penalty - will be enforceable. Reasonableness may depend on the salary package of the employee to determine whether the repayable sums are reasonable and lawful and will usually mean that the amount repayable to be repaid should decrease over time. 

• Even if your business does not support employees with any visa costs, workers may start to turn to employers to see what extra support they can offer to ease personal cash flow pressures at the point of visa application. That could be through salary advances or employee loans, although tax advice should always be sought. If this isn't possible and workers are unable to pay the fees, there may then be resulting right to work and employment termination considerations.

If you would like to explore any of this further, please do get in touch with us.