England’s mayors are set to receive new England tourist tax powers allowing them to levy a charge on overnight visitors, as housing secretary Angela Rayner meets regional leaders to outline the government’s proposals. The move would let strategic authorities introduce a fee based on a percentage of accommodation costs, rather than a flat rate, which the government says will protect budget stays.
How the England tourist tax powers would work
Under the proposals, local leaders would be able to set their own rates with no upper limit on what can be charged, mirroring the approach adopted in Scotland. Authorities would be required to publish plans for how revenues would be invested by March 2028, according to a policy paper titled ‘Rewiring the State’, which the government published in July. ‘We will also give all strategic authorities the ability to introduce an overnight visitor levy, with local leaders able to set out plans for how revenues will be invested by March 2028,’ the paper stated.
The Scotland comparison is instructive. BBC has reported that Edinburgh became the first city in Scotland to introduce such a tax in July, charging an additional 5% on top of the original booking cost for those staying in hotels, bed and breakfasts and self-catering accommodation. The Edinburgh charge is capped at five nights.
Andy Burnham is familiar with the territory. During his time as Manchester Mayor, he introduced a City Visitor Charge in April 2023, set at £1 per room per night, with receipts directed at measures to attract more visitors. Sadiq Khan, mayor of London, has also voiced support for similar powers. ‘I think the Government should be looking at giving us the powers to have an accommodation levy. But my promise to the hotels and AirBnbs and so forth is the money would be used to improve the environment around that, to encourage more tourists,’ Khan said at a City Hall event.
Industry warns of job losses and spending decline
The proposals face opposition from the hospitality sector. UK Hospitality warned earlier this year that a tourist levy would push up the cost of holidays at a time when households remain stretched by cost-of-living pressures. Analysis by Oxford Economics, commissioned by UK Hospitality, modelled three different levy scenarios, finding that each would negatively affect jobs and visitor spending.
Under a five per cent levy on accommodation costs, Oxford Economics forecast that as many as 33,000 jobs could be lost by 2030, accompanied by a £1.8 billion drop in tourism spending. The same modelling found that Treasury tax receipts would fall by £688 million as a result.
The scale of what is at stake for the wider economy is considerable. According to Courthouse News Service, the UK tourism industry contributed £64.3 billion to the economy in 2024, with 42.6 million foreign visitors spending £32.5 billion that year. Any sustained dip in visitor numbers or average spend would therefore have consequences well beyond individual hotel balance sheets.
The local finance dimension adds another layer to the debate. Courthouse News Service also reported that just 6% of national taxes in the UK are collected at the local level, placing Britain among the lowest in the G7 for local revenue-raising. Handing mayors a dedicated tourism levy would represent a modest but concrete shift in that balance, giving city and regional leaders a revenue stream they can direct rather than lobby Whitehall for.
For businesses, the concern is not purely about the rate of any levy but about the cumulative effect on a sector still recovering from pandemic disruption. UK Hospitality’s core argument is that higher costs at the point of booking will suppress demand, rather than simply redistributing it between destinations. The government’s counter is that a percentage-based charge, rather than a flat fee, keeps the burden proportionate and avoids penalising the cheaper end of the market.
Local leaders will now need to decide whether to use the powers if they are formally granted. Under the current timetable, authorities would need to publish their investment plans by March 2028, meaning any charge could still be some way off for most cities outside those, like Manchester, that have already moved in this direction.
