Regional mayors in England will soon have the authority to implement an unlimited "overnight visitor levy" on stays in hotels, bed and breakfasts, and holiday rentals, a move that has drawn sharp criticism from business groups and opposition figures. The government has stated this decentralization of power allows local leaders to make decisions best suited for their areas.
The new levy, expected to be introduced from 2028, will be calculated as a percentage of accommodation charges, rather than a flat fee, and will not be capped. Regions under Labour leadership are anticipated to set the tax at approximately 5 percent. This policy shift has been met with strong objections, with concerns that it will disproportionately affect families and harm the hospitality industry.
Business organizations have described the decision as detrimental, warning it could jeopardize tens of thousands of jobs and cost holidaymakers an estimated £1.6 billion by the end of the decade. According to figures from Oxford Economics, a 5 percent levy, fully realized by 2030, could result in a £688 million reduction in Treasury tax receipts, a £101 million loss in direct investment from hospitality and tourism businesses, 11.9 million fewer overnight stays, and the loss of 33,000 jobs due to an overall £1.8 billion cut in tourism spending.
"Just days ago, Andy Burnham said his was a 'cost of living Government.' Now he is launching another tax raid on hardworking families," stated Shadow Chancellor Andrew Griffith. "His tourism tax will hammer the hospitality industry... driving up the cost of the family holiday and discouraging people from holidaying in the UK."
For a family spending £2,000 on a hotel room or rented cottage, a 5 percent tax would add £100 to their holiday costs. Tina McKenzie, national chairman of the Federation of Small Businesses, called the uncapped levy "a kick in the teeth for the hospitality industry" at a time when small businesses are already facing numerous cost increases. Allen Simpson, chief executive of the UK Hospitality trade body, noted that local mayors might over-utilize this new tax-raising power.
This development builds upon existing visitor levies. Andy Burnham introduced a £1-plus-VAT city visitor charge per room, per night in Greater Manchester in 2023. Liverpool implemented a £2 rate, while Edinburgh introduced a 5 percent charge for stays up to five nights, and Cardiff is set to implement a £1.30 per night levy. However, the new government-approved plans extend these powers to England's 14 regional mayors, with areas lacking a mayor but undergoing local authority reorganization also slated to gain these charging capabilities.
Despite concerns, Communities Secretary Angela Rayner framed the policy as an opportunity for areas to "celebrate the tourism that comes to their areas, but then redirect that into their local area." However, a government consultation last year revealed that 60 percent of respondents opposed a percentage-based rate model, with only 21 percent in favor. More than half of respondents favored a maximum rate, but these objections were overruled.
London Mayor Lord Khan suggested that high taxes do not deter tourists, a view contested by some regional mayors. Dame Andrea Jenkyns, mayor of Greater Lincolnshire, has vowed not to implement the tax, and other mayors, including Hull and East Yorkshire mayor Luke Campbell and Conservative Tees Valley mayor Lord Houchen, have also ruled it out. Cambridgeshire and Peterborough mayor Paul Bristow criticized the timing, stating "The UK economy is struggling – hospitality is being impacted by NI rises, tax hikes and other costs. This is not the time to put extra costs on staying overnight."