Families planning UK holidays could face additional costs following announcements in the Chancellor's recent Budget. Starting in 2028, mayors will have the authority to implement an 'overnight visitor levy' on stays in hotels, bed and breakfasts, and holiday lets. While officially uncapped, Labour regional mayors have indicated they would cap the levy at 5 percent. However, UKHospitality estimates that this tax could add approximately £100 to a family of four's 14-night break, based on a £2,000 holiday cost. A levy of £2 per person, per night could amount to an extra £112 for such a trip, or £100 if capped at 5 percent.
Mayors and local leaders will have the discretion to introduce the levy and decide how the collected revenue will be invested in their areas, following consultation with residents and local businesses. Not all leaders are expected to implement the tax. IMAGE1
Beyond domestic tourism, changes to air passenger duty could also impact the cost of flying. Analysis from AirAdvisor suggests that families booking long-haul trips for summer 2027 could face a £503.90 tax charge for two children traveling in premium economy, whereas these children would be exempt if flying in economy. This change, effective April 1, 2027, applies to departures from England to destinations including the United States, India, and many Caribbean countries. The disparity stems from an existing Air Passenger Duty rule that removes the exemption for individuals under 16 when they travel in classes above the lowest cabin class.
The Budget also confirmed a further increase in this duty from April 2028, which will raise the combined charge for two children in premium economy to £519.54, an increase of £15.64 from the previous year's figure.
In addition to the tourism levy and air passenger duty adjustments, the Budget announced an increase in the minimum wage by 3.9 percent, raising it from £12.71 to £13.20 per hour starting in April. Allen Simpson, CEO of UKHospitality, stated that this rise in the national living wage will "add further pressure for hospitality businesses already grappling with substantial increases in costs." He acknowledged the Budget offered some positive news for the sector, particularly the change to hospitality business rates across England, which will be frozen in real terms, reduced, or cut to zero for two years starting in April. However, Simpson emphasized that further action, such as a VAT cut, is still needed.
Julia Lo Bue-Said OBE, spokesperson for The UK Outbound Travel Group and CEO of Advantage Travel Partnership, expressed that the Chancellor missed an opportunity to support the travel sector. She suggested that if the government is serious about economic growth and easing household budget pressures, it should address costs it directly controls, such as Air Passenger Duty. Lo Bue-Said also noted that the increase in the National Living Wage will add to employment costs for the industry. IMAGE2