Mayors to Get Power to Impose Tourist Tax on Overnight Stays

Mayors in England are to be handed the power to impose an overnight visitor levy on tourists under plans to be announced by the government later, a move that would allow local leaders to set an uncapped charge as a percentage of the cost of hotel rooms, bed and breakfasts and other accommodation rather than a flat fee. Hospitality leaders have warned that "jobs are now at risk" and that families holidaying in England would feel the pinch, though ministers are understood to believe mayors are unlikely to make stays too expensive, with budget holidays protected by the fact that the levy is not a flat fee.

The idea was first raised under former Prime Minister Sir Keir Starmer in November and mirrors schemes already operating in Scotland and across Europe. Further details are expected after the Housing Secretary, Angela Rayner, meets mayors virtually at No 10 North on Thursday afternoon. Under the proposals, local leaders would determine how the revenue raised should be reinvested, with a government source saying "it will be up to local leaders and local voters" in England "to decide what is right for their area". The consequence is that a holiday in England could become more expensive wherever local leaders choose to implement the tax.

UKHospitality, the leading trade body, has hit back at the plans, warning they are "not going to be painless". Its chief executive, Allen Simpson, claimed the levy would add about £100 to £120 on average to the cost of a family holiday in England, amid fears that mayors would exploit the fact that there is, in theory, no upper limit. "We know, don't we, that local government is struggling for funds — it was hit very hard by austerity," he told BBC Radio 4's Today programme. "If you only devolve one tax raising power, of course local mayors are going to pull that lever until it snaps." He added: "It will be the case that you'll have holiday parks which can't open in the shoulder seasons and of course people who go on holiday will just have that little bit less money in their pocket."

David Simmonds, the Conservative shadow housing secretary, said: "VAT is already charged at 20% on hotels — much higher than in other countries — and now they'll pay VAT on this tourism tax too: a Labour double whammy." Nigel Farage, leader of Reform UK, said his party's two mayors in Greater Lincolnshire and Hull and East Yorkshire "won't touch" the levy, which he branded a "holiday tax".

The Overnight Visitor Levy, outlined in the King's Speech in May, has not yet been brought forward in Parliament. Prime Minister Andy Burnham is framing the policy as part of his wider devolution agenda. Under the plans, mayors and leaders of Foundation Strategic Authorities — which cover some regions without a mayor — would need to clarify by March 2028 how they would spend the new revenue.

Two cities in England already operate their own voluntary schemes: a £1 per room, per night City Visitor Charge in Manchester, introduced when Burnham was mayor of the region, and a £2 nightly charge in Liverpool. Both are business-led arrangements in which hotels choose to pool the money raised to support local tourism. Regional mayors currently lack the power to bring in such fees themselves, and argue it is needed to boost economic growth. Oliver Coppard, the mayor of South Yorkshire, told BBC Radio Sheffield that Labour mayors would consult industry leaders before introducing the levy, saying it could be spent on areas including street cleaning and night buses.

Sir Sadiq Khan, the Mayor of London, who will attend the No 10 North meeting, told the Standard on Thursday morning that the change "needs to happen sooner rather than later". It is understood he supports a maximum 5% levy. Paul Swaddle, leader of Westminster City Council, responded by warning "there will be precisely zero benefit to Westminster residents and businesses" if Sir Sadiq does not share some of the cash raised with councils.

John Chappell, who runs five caravan parks in Skegness, Lincolnshire, told BBC Your Voice that many English tourist resorts already host visitors on tight budgets who are struggling with the cost of car travel. An extra cost, he said, would "kill the industry off". "Tourists are the saviours of our resorts, not the demons and ill thought-out ideas like these show how out of touch with reality politicians are," he added.

Such taxes are common in Europe and beyond, with New York, Amsterdam and Rome applying overnight charges to accommodation stays to fund local services, though they are capped in several European cities. In Scotland, local authorities can charge a visitor levy on overnight accommodation; in Edinburgh the rate is 5% for those staying 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 set to be introduced in April next year, with local authorities deciding whether to roll it out.