England's higher education sector is preparing for a significant policy change after the UK government published draft legislation introducing an International Student Levy. Released on 13 July 2026 as part of the draft Finance Bill, the proposal would require Office for Students (OfS)-registered higher education providers in England to pay £925 for every international student enrolled from 1 August 2028.
The draft legislation follows a technical consultation that attracted responses from universities, sector bodies, student unions and other stakeholders. Alongside the legislation, the Department for Education (DfE) published its consultation response, providing greater clarity on how the levy will operate and which students and providers will fall within its scope.
A flat-rate levy replaces the original proposal
The final policy differs from the proposal outlined in the 2025 Immigration White Paper, which suggested a levy equivalent to 6% of international tuition fee income. Instead, the government has opted for a flat-rate charge of £925 per international student, which it estimates is broadly equivalent to around 4.5% of providers' international fee income.
To reduce the impact on smaller providers, the government intends to exempt each institution's first 220 international students, representing an annual allowance of up to £203,500. The levy may also be increased in future through regulations to reflect inflation.
Who pays?
The levy applies to OfS-registered higher education providers in England, including universities and further education colleges offering higher education programmes.
Liability rests with the registered provider, rather than the organisation delivering the teaching. As a result, international students enrolled through franchise arrangements, embedded colleges, joint ventures and other subcontracted provision remain within the scope of the levy where they are registered with the OfS-registered provider.
By contrast, validation-only partnerships are treated differently. Where another institution recruits and registers students while a university acts solely as the validating institution, the levy will apply to the registering provider, not the validating university.
Offshore TNE remains exempt
Perhaps the most significant clarification concerns transnational education (TNE).
The government has confirmed that students studying entirely outside the UK will remain outside the scope of the levy. This includes students enrolled at overseas branch campuses, offshore partner institutions, or undertaking distance learning entirely outside the UK, regardless of whether tuition fees are received by a UK university.
The distinction reflects the government's broader policy objective. Rather than taxing all forms of international education, the levy focuses on international students studying in England, while preserving the competitiveness of UK transnational education as a major education export.
For universities with substantial offshore operations, the policy provides greater certainty that existing TNE models will not be affected. Institutions whose international strategies rely primarily on recruiting students to England, however, will face an additional operating cost from 2028 onwards.
Preparing for implementation
The government intends to minimise the administrative burden by using existing student data submitted through the Jisc Student Record and the Individualised Learner Record (ILR).
The Office for Students is expected to calculate each provider's levy liability after the end of the academic year and issue invoices each February, with payment due within 30 days.
To support financial planning, the OfS will conduct two trial levy calculations using 2026/27 and 2027/28 student data before the levy takes effect. These trial exercises will not require any payment but will allow institutions to estimate their future liabilities.
Funding domestic priorities
According to the government, revenue generated by the levy will be fully reinvested into the higher education and skills system. The funding will support the reintroduction of targeted maintenance grants, progression through post-16 education and wider skills initiatives.
Ministers also argue that planned inflation-linked increases in domestic tuition fee caps will provide universities with substantially more additional income than the levy will cost. Government estimates suggest inflation-linked fee increases could generate around £6 billion in additional funding over five years, compared with a projected levy cost of less than £1 billion during the same period.
Sector concern
The proposal has nevertheless prompted criticism across the higher education sector.
Vivienne Stern MBE, Chief Executive of Universities UK, described the levy as "effectively a tax on a major UK export", arguing that international students contribute significantly to local economies while supporting teaching and research across British universities.
The comments reflect wider concerns that the additional cost could affect universities already facing financial pressures and intensifying global competition for international students.
Looking ahead
The draft legislation will undergo technical consultation before being introduced as part of the Finance Bill later this year. Secondary legislation covering exemptions, allowances, payment arrangements and enforcement is expected to follow before implementation.
For universities, the proposal represents more than a new financial obligation. It establishes a clear policy distinction between international students studying in England and students enrolled through offshore transnational education. Franchise partnerships recruiting international students into England will be subject to the levy, while validation arrangements and offshore TNE remain largely unaffected. As institutions review their international strategies over the next two years, these differing policy treatments are likely to become an increasingly important consideration in the development of future international partnerships.
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