Local leaders in the United Kingdom are set to gain the power to impose charges on accommodation, a move intended to raise revenues for local services and attractions. This new legislation, described as an 'Overnight Visitor Levy,' will allow mayors and other local authorities to set a percentage-based charge on the cost of overnight stays, with no upper limit.
Proponents of the tax, primarily Labour mayors, celebrated the announcement. London Mayor Sadiq Khan indicated he is considering a charge of up to 5 percent, which could generate an estimated £580 million annually for the capital. Other Labour mayors in areas including Liverpool, the East Midlands, Yorkshire, and the West of England have also signaled their intent to implement the levy. Experts estimate the policy could collectively bring in as much as £1.6 billion nationwide. Angela Rayner, who chaired a meeting of mayors, stated that the revenue could support local services and attractions. The plans for such a tax were initially announced by Sir Keir Starmer, drawing parallels with similar schemes already in place in Scotland and Wales.
However, the hospitality industry has voiced significant opposition, warning of a potential jobs "catastrophe" and increased costs for struggling families. Allen Simpson, chief executive of UK Hospitality, cautioned that an uncapped, open-ended power for mayors to set tourism taxes could have damaging effects, citing issues already observed with a tourism tax in Edinburgh. He argued that holidays in the UK are already expensive due to higher VAT and that this additional levy could put tens of thousands of jobs at risk. Simpson noted that unlike capped tourism taxes in European cities like Paris or Rome, the UK proposal has no national upper limit.
Jon Hendry Pickup, CEO of Butlin's, echoed these concerns, stating the levy would disproportionately affect those with lower incomes and could lead to resorts being unable to open during shoulder seasons. He expressed concern that an uncapped levy would make family holidays less affordable and hinder businesses' ability to hire young people. Stephen Cassidy of Hilton UK & Ireland described the tax as a "catastrophic blow" to the UK hotel sector, which is already grappling with high VAT, business rates, and energy costs. He argued that such a tax would stifle job creation and investment, making it harder for hospitality businesses to provide employment opportunities. Luke Petherbridge of the travel association ABTA expressed disappointment, warning that the tax would further damage the competitiveness of the UK tourism sector and that the percentage-based model had already proven problematic in Scotland.
Local Government minister Jim McMahon stated that the percentage-based model would ensure charges are proportionate to the cost of the stay, meaning budget hotels would face lower levies than luxury establishments. He added that the government would provide guidance to local leaders considering the levy, with mayors able to set out their spending plans by March 2028. Downing Street emphasized that the government trusts local leaders to make decisions for their areas, aiming to shift power from Whitehall and enable communities to reinvest tourism revenue into local priorities such as transport and public spaces. Andy Burnham had previously introduced a £1 per room per night City Visitor Charge in Manchester in April 2023.