Written by Harry Law
In its final week in power, the Starmer government published draft legislation for its planned International Student Levy on universities. The measures would take effect from the 2028/29 academic year. The Starmer government intended to introduce the legislation in the 2026 Autumn Finance Bill. The new Burnham government (which took over on the 20th July) has not yet confirmed whether it will proceed with the plans.
The levy, which was confirmed in a government technical consultation response published on the 13th July, would involve a flat tax on higher education providers of £925, charged for each international student after the first 220. In LSE’s 2024/25 Financial Statements, LSE President and Vice Chancellor Larry Kramer described LSE as “very exposed” due to its “substantial international student population,”. However, this was in response to an earlier version of the policy involving a 6% tax on international student fee income (which would have been more costly for LSE).
If the international student population at LSE remains similar to the 2024/25 level of 7,980, also reported in the statements, the Beaver calculates LSE’s expected liability under the levy to be around £7.2 million per year, against an underlying operating surplus of £10.4 million in 2024/25.
If the levy goes ahead, the government projected in November 2025 that it would raise over £400 million a year to fund means-tested maintenance grants to support disadvantaged domestic students studying “priority” courses, with then-Education Secretary Bridget Phillipson arguing it would make a “big, big difference to many young people across the country.” The Sutton Trust, a social mobility charity, lauded the maintenance grant scheme as “a positive step to breaking down barriers to opportunity.”
However, the levy has drawn criticism from much of the higher education sector, which argues it is the wrong way to raise money for the scheme. Universities UK stated in February that “funding maintenance grants through an international student levy risks exacerbating existing financial vulnerabilities in the sector at a time when universities face the cumulative effect of other financial sustainability challenges.” Nick Hillman, Director of the Higher Education Policy Institute (HEPI) suggested that “a new tax on student fees may lead to less research as well as a worse student experience” as universities cut costs.
To avoid this, some higher education institutions may choose to pass the cost on through higher fees for international students, but this possibility has also encountered scepticism and opposition. Fees for international students already heavily subsidise the domestic sector through higher fees, paying almost twice as much on average for a UK classroom-based masters degree according to FindAMasters, and facing undergraduate fees that often far exceed £20,000 a year, while home student fees are currently capped at £9,790. Hillman highlights that the money raised through these fees is critical in funding research, with grants and contracts only providing 67p out of every £1 spent on research in UK higher education institutions. Universities UK challenged the Department for Education’s November 2025 claim that “international demand is on average price inelastic across the sector,” arguing that overseas education “demonstrates very high sensitivity to tuition fee levels” and that therefore “universities will not be able to pass on the cost of a tax to international students” without this also “having a significant impact on their finances” due to a “far smaller recruiting pool.”
When approached for comment, LSE said:
“The international student levy is a damaging proposal that effectively amounts to a tax on one of the UK’s most successful exports. We should be actively encouraging top students from around the world to come here, not putting in place more barriers. We have not yet determined how this potential new cost will be absorbed.”
