UK Universities Could Lose £620 Million from New International Student Levy

UK universities could face a financial hit of £621 million if the government moves forward with a new 6% levy on international student tuition fees, according to new analysis from the Higher Education Policy Institute (HEPI).

The proposal, which appeared in the government’s recent immigration white paper, came as a surprise to many in the education sector. The idea behind the levy is to use part of the money that international students pay in tuition to help fund the wider higher education and skills system in the UK.

But experts warn that the levy could seriously hurt universities’ ability to compete with international institutions, especially at a time when global student recruitment is already challenging.

Top Universities Could Lose Millions
Researcher Mark Fothergill, who compiled the HEPI data, said the policy could have a major effect on both large and small universities. Institutions with a high number of international students would face the biggest losses.

For example:

• University College London (UCL), where 79% of tuition income comes from international students, could lose up to £42 million.
• University of Manchester could see losses of £27 million.
• King’s College London (KCL) might lose £22 million.
• In total, 19 UK universities may each lose £10 million or more.

Where Will the Money Go?
The government says the money will be used to support the education system. However, it's still unclear how much of it will be returned to the sector, and what exactly it will be spent on. Stakeholders are worried it may simply go into the Treasury without benefiting universities or students directly.

“International students are the backbone of our higher education system,” said Fothergill. “They contribute over £10 billion in fees to English universities – that's about £4.50 of every £10 of fee income.”

That’s why many people are calling the levy a tax on one of the UK’s most successful sectors.

A Difficult Choice for Universities
With no final decisions yet, universities are now facing a tough choice. According to HEPI, they can either:

• Raise tuition fees for international students to cover the cost — but risk making UK universities less competitive globally.
• Absorb the costs themselves, which could reduce money available for teaching, research, and staff.

Either way, the impact could be damaging — especially because many universities rely on international student fees to fund research, which often loses money without this support.

The Graduate Route Visa Also Under Review
The government’s immigration white paper also proposes cutting the graduate route visa — which currently lets international students stay in the UK for two years after graduation — down to just 18 months.

At the same time, it will bring in stricter rules for universities through Basic Compliance Assessments (BCA) starting in September. These changes are likely to affect how attractive the UK looks as a study destination.

Warnings from the Sector
Speaking at a recent event, UK Skills Minister Jacqui Smith said the government wasn’t charging students directly, but rather charging institutions. She also said the goal was to better show the positive impact of international students on local areas.

But university leaders, researchers, and policymakers have all raised concerns.

HEPI director Nick Hillman called the levy “an expensive new tax” with no clear plan for how the funds will be used. “It’s a big worry for universities as they try to prepare for the next academic year,” he said.

With the UK already considered one of the most stable study destinations among major global education hubs, many fear the levy could hurt the country's reputation — especially at a time when students are looking for security and value.

Australia Said No — Should the UK Follow?
Experts point out that Australia had proposed a similar levy a few years ago, but decided not to go ahead with it due to strong opposition and the risk of damaging its education sector.

In the UK, the situation is already serious. According to data from the Office for Students (OfS), 72% of universities could be running at a loss by 2025/26, with total sector losses projected to reach £1.6 billion.

Hillman warned that this new policy could be “another weight dragging down” a sector already under heavy pressure.

What’s Next?
More details about the levy and related immigration policies are expected to come in the autumn budget. Until then, universities are left in a difficult position — unsure of how to plan, recruit, or budget for the future.

As the UK tries to remain a top destination for international students, the government’s next steps will be closely watched by the global education community.

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