NHS Faces £100 Million Annual Shortfall as Migration Falls

Falling immigration is reducing a significant source of funding for Britain's National Health Service (NHS), with revenue from the Immigration Health Surcharge dropping by more than £100 million in 2025-26. The Nuffield Trust, a health policy think tank, warned that further declines could deepen financial pressures on the health service as the government tightens visa rules.

The surcharge generated approximately £2.32 billion in 2025-26, down from a peak of £2.42 billion in 2024-25, according to the Nuffield Trust's analysis reported by The Times and National Health Executive. The revenue previously accounted for about 1% of the NHS budget, compared with approximately 0.1% when the system was introduced in 2015.

Most visa applicants coming to the UK for more than six months pay an annual Immigration Health Surcharge (IHS) of £1,035 to access NHS treatment. Students and child dependants generally qualify for a reduced annual rate of £776, according to National Health Executive.

Net migration to the UK fell to 171,000 in the year ending December 2025, compared with a peak of 944,000 in the year ending March 2023. The Times reported that net migration in 2025 was 48% lower than in the previous year, following immigration policy changes under Home Secretary Shabana Mahmood.

Stelios Vassiliou, a fellow at the Nuffield Trust and author of the analysis, said the surcharge had become a substantial component of NHS financing.

"Whether by accident, by design, or a combination of the two, the immigration health surcharge has grown to a prominence that cannot be ignored.

"If the level of income from the charge was to fall back to that seen at its inception in 2015-16, the NHS would be left facing a shortfall in the billions, as it has grown reliant on immigrants in this group contributing substantially more to the NHS than they take out. Our analysis should give politicians pause for thought about this unforeseen, and possibly overlooked, consequence of changes to visa rules.

"With around a fifth of the NHS workforce hailing from overseas, it's well understood that immigration affects NHS staffing. This analysis shines a light on migrant contributions to our health service that receive far less attention.

"The government needs to think carefully about what it's trying to achieve with the surcharge. We need clarity on whether this policy is about migrants paying their fair share, topping up NHS funding, or discouraging migration in the first place."

The think tank found that migrants who pay the surcharge contribute substantially more to NHS finances than the average cost of the healthcare they use. Including the surcharge and income taxes, migrants contributed an average of 60% more than the cost of their NHS care, based on the analysis of 2023-24 financial data cited by National Health Executive.

The report highlighted differences between visa categories. A skilled worker earning £55,000 annually without dependants would contribute approximately five times the average cost of their NHS care, according to The Times. A worker earning the same salary with three dependants would still contribute more than twice the average healthcare cost, while students were estimated to contribute 25% less than the average cost of their care.

The analysis also questioned the Department of Health and Social Care's estimates of healthcare costs among surcharge-paying migrants, raising questions about whether the fee exceeds the expenditure associated with their treatment. Migrants generally stop paying the surcharge after obtaining settled status, which they can apply for after a minimum of five years in the UK, reducing their contribution through this mechanism over time.

Another concern is how the revenue is allocated. National Health Executive reported that applicants often pay the surcharge upfront for a visa lasting several years, but the money is transferred to the NHS and spent in the first year. This arrangement can expose the health service to funding fluctuations when new visa applications decline.

The report said annual surcharge revenue remained between £150 million and £250 million from 2015 to 2018 before rising sharply as fees increased and immigration levels grew. The charge was originally set at £200 annually when introduced in 2015.

The Department of Health defended the policy, saying applicants who intend to enter or remain in the UK for more than six months pay for potential healthcare costs in advance.

"The IHS is an entirely fair system that means migrants who apply to enter or remain in the UK for more than six months pay the costs upfront for any NHS treatment they may end up needing while they are here."

The Times also reported that Health Secretary Yvette Cooper had sought additional Treasury funding to compensate for the revenue shortfall, but the request was rejected by Andy Burnham and Chancellor John Healey.