A proposal to tax UK universities 6 per cent of international students' fees could lead to cuts in teaching and research, a report has warned.
Plans were outlined in the government’s white paper on immigration in May, in which new fees and restrictions on overseas students and schoolchildren were announced.
More details are expected in Chancellor Rachel Reeves's autumn budget and a forthcoming white paper from the Department of Education.
But the Higher Education Policy Institute think tank calculates the tax could leave English universities with new costs of £621 million a year, and questions how the government would spend the money raised.
“Threatening an expensive new tax on one of the country’s most successful sectors with only a rough idea of how the money will be used seems far from ideal,” said Hepi director Nick Hillman.
“Currently, the levy is a shadow looming large over universities as they prepare for the next academic year.
“University leaders are worried it will be yet another weight dragging them down in the struggle to remain globally competitive.”
International students, who pay much higher rates than UK students, contribute more than £10 billion in fees to English universities − around 45 per cent of their total fee income.
Major universities − including University College London, Imperial College and the London School of Economics − derive more than 70 per cent of their fee income from non-British students.
Figures for 2024 showed record numbers ofUAE residents applying to UK universities, with more than 8,000 are studying in British institutions.There were 8,085 UAE students studying on PhD, postgraduate and undergraduate courses in the UK in 2022 – up from 4,715 in 2017, data from the Higher Education Statistics Agency (HESA) revealed.
Hepi said that among institutions facing hefty tax bills under the proposals would be UCL (£42 million), the University of Manchester (£27 million) and King’s College, London (£22 million).
International student fees are used to subsidise research, as universities face a £6.2 billion shortfall in research funding through grants and contracts.
To offset the tax, universities could absorb the costs by cutting teaching and research or to pass on the costs to students.
Hepi's projected figures were calculated by using the available data from 2023/2024.
“International students are the backbone of our higher education system … No wonder the 6 per cent levy is seen as a tax on one of the country’s best-performing sectors,” said Mark Fothergill, an independent researcher who compiled the data.
“The market for international students is competitive and a levy would hamper universities’ ability to compete with institutions in other countries.”
An Australian proposal for a similar levy was scrapped two years ago, over fears of the impact it would have on universities, said Mr Fothergill.
Though the government has said it would use the money raised from the tax to fund educational priorities, Mr Hillman said there was no transparency as to how this would be done.
“The levy is designed to raise more money for the government’s educational priorities but it is not clear if all the money will come back out of the Treasury, nor how it will be spent if it does,” he said.
Universities already face financial difficulties. Last year, the Office for Students, the regulator of higher education in England, warned that 72 per cent of providers could be in deficit by 2025/26, to a total £1.6 billion.
The Department for Education did not comment.
