Mayors in England are set to be granted the authority to introduce an overnight visitor levy on tourists, according to plans announced by the government. This levy, referred to as a "tourist tax," would be based on a percentage of accommodation costs rather than a flat fee. Cities such as London are expected to utilize this new power.
Hospitality leaders have expressed concerns that the proposals could jeopardize jobs and increase costs for families vacationing in England. However, government ministers believe that mayors will likely avoid setting excessively high rates, as the percentage-based levy would protect budget holiday options.
The concept was initially proposed by former Prime Minister Sir Keir Starmer in November and mirrors similar initiatives in Scotland and various European capitals. Further details are anticipated following a virtual meeting between Housing Secretary Angela Rayner and mayors at No 10 North on Thursday afternoon.
Under the proposed framework, local leaders would determine how to reinvest the revenue generated from the levy. A government source indicated that it would be up to local leaders and voters in England to decide what is appropriate for their regions.
The introduction of this tax could potentially raise the cost of holidays in England if local leaders opt to implement it. UKHospitality, a leading trade organization, has criticized the proposals, stating they will not be without consequences. Chief Executive Allen Simpson estimated that the tax could add approximately £100 to £120 to the average cost of a family holiday in England, raising concerns that mayors might exploit the absence of a cap on the levy.
Simpson noted the financial struggles faced by local governments, which have been significantly impacted by austerity measures. He warned that if only one tax-raising power is devolved, local mayors might excessively utilize it.
A 5% tourist tax for overnight stays was introduced in Edinburgh in July. The Overnight Visitor Levy, mentioned in the King's Speech in May, has yet to be presented in Parliament.
Prime Minister Andy Burnham has positioned the policy as part of a broader devolution agenda, allowing mayors to outline plans for the investment of new revenues by March 2028. Burnham previously served as mayor of Greater Manchester, where a City Visitor Charge of £1 per room, per night was implemented in April 2023 to fund initiatives aimed at attracting more visitors.
Regional mayors argue that the levy is necessary to generate additional income for local priorities and to foster economic growth. Similar taxes are prevalent in Europe and worldwide, with cities like New York, Amsterdam, and Rome imposing overnight charges to support local services, although some European cities have capped these taxes.
Mayor of London Sir Sadiq Khan has endorsed a tourist tax for overnight visitors, which could potentially generate over £350 million annually for the capital, based on a 3% levy on room costs, including hotels and short-term rentals. In Scotland, local authorities can impose a visitor levy on overnight accommodations, with Edinburgh's rate set at 5% for stays in hotels, bed and breakfasts, and self-catering facilities, capped at five nights. In Wales, a capped levy of £1.30 per person per night is scheduled to be implemented in April next year.