The UK government has empowered regional mayors to implement an unrestricted 'overnight visitor levy' on accommodations, a move that has drawn sharp criticism from business organizations and political opponents who argue it will harm families and the hospitality sector.
The new authority allows mayors in England to impose a percentage-based tax on hotel, bed and breakfast, and holiday let stays. This levy will not be capped, and is expected to be set at around 5 percent in Labour-controlled areas. Business groups have decried the decision as detrimental to the industry, warning it could jeopardize tens of thousands of jobs and cost holidaymakers an estimated £1.6 billion by 2030.
Shadow Chancellor Andrew Griffith stated that the tax contradicts the government's claims of being a "cost of living Government" and will increase the expense of domestic holidays. He also suggested the revenue generated would fund additional benefits.
Economic projections from Oxford Economics, cited by UK Hospitality, suggest that a 5 percent levy could lead to a £688 million reduction in Treasury tax receipts, a £101 million decrease in direct investment from tourism businesses, 11.9 million fewer overnight stays, and a loss of 33,000 jobs due to a £1.8 billion drop in tourism spending by 2030.
Federation of Small Businesses national chairman Tina McKenzie called the uncapped levy a "kick in the teeth" for a hospitality industry already contending with rising costs. UK Hospitality chief executive Allen Simpson expressed concern that local mayors would excessively utilize this new tax-raising power. He noted that UK holidays are already more expensive than in many European countries due to a 20 percent VAT rate, and that tourism taxes in cities like Paris, Rome, and Berlin are capped.
This expansion of the visitor levy follows previous introductions by Labour mayors. Andy Burnham implemented a £1 plus VAT per room, per night charge in Greater Manchester in 2023, and Steve Rotherham introduced a £2 rate in Liverpool last year. Edinburgh began a 5 percent charge for stays up to five nights this summer, and Cardiff is set to implement a £1.30 per night levy in April.
The government's decision to grant this power to England's 14 regional mayors, effective from 2028, overrides objections raised during a public consultation. The consultation revealed that 60 percent of respondents opposed the percentage-based model, with a majority also against mayors setting the rate and favoring a maximum cap.
Communities Secretary Angela Rayner defended the move, stating it allows areas to "celebrate the tourism that comes to their areas, but then redirect that into their local area." However, some mayors have opposed the tax. Reform's Dame Andrea Jenkyns, mayor of Greater Lincolnshire, vowed not to implement it, and the mayors of Hull and East Yorkshire, and Tees Valley have also ruled it out. Conservative mayor Paul Bristow of Cambridgeshire and Peterborough argued that it is not the appropriate time to add extra costs for overnight stays given the struggling UK economy.
Despite opposition, the government maintains that the initiative shifts power from Whitehall to local leaders. London mayor Lord Khan suggested that high taxes do not deter tourists, though this is disputed by critics who point to the potential economic repercussions for destinations like Cornwall, which attract significant visitor numbers.
