British holidaymakers could soon face additional charges for overnight stays in hotels and Airbnb accommodations under new powers being considered for local mayors.
Budget Announcement Expected
Chancellor Rachel Reeves is reportedly preparing to announce plans in the upcoming budget that would enable mayors across England to implement tourist taxes. The move would allow city leaders to charge visitors for overnight stays to raise funds for local infrastructure and public services.
This development comes as the hospitality industry continues to recover from previous tax increases and employment cost changes announced in the last budget. Government sources indicate that England currently stands out among developed nations for not having a tourism levy, with both Scotland and Wales already moving forward with similar schemes.
Industry Concerns and Financial Impact
The trade body UKHospitality, representing thousands of restaurants, hotels and pubs across the country, has expressed significant concerns about the potential impact. The organisation estimates that a 5% holiday tax - matching the rate set to be introduced in Edinburgh from next July - would cost British consumers £518 million in additional expenses.
Kate Nicholls, chair of UKHospitality, stated: "I know the government is worried about the cost of living, but this holiday tax is little more than a higher VAT rate for holidaymakers. Brits take more than 89 million overnight trips in England, and stay for a total of 255 million nights. This is a bill we will all have to pay, and will only serve to ramp up prices and drive inflation."
The industry body calculates that when combined with the standard 20% VAT on hotel stays, plus VAT on the holiday tax itself, the effective consumer tax rate could reach 27%, making it among the highest tourist tax rates in Europe.
Mayoral Support and Funding Potential
Despite industry opposition, several prominent mayors have actively campaigned for these powers. Earlier this summer, a coalition including London mayor Sadiq Khan and Greater Manchester mayor Andy Burnham wrote to Culture Secretary Lisa Nandy and Chancellor Reeves urging the introduction of a visitor levy.
They argued that a charge of £1 to £5 per night in Greater Manchester could generate between £8 million and £40 million annually, potentially funding major infrastructure projects such as the regeneration of Old Trafford or airport development.
The legislative changes will be introduced through amendments to the English devolution and community empowerment bill, which is currently progressing through Parliament.
Meanwhile, Edinburgh is poised to become Scotland's first city to implement a tourist tax at 5% starting next July, while Welsh councils will gain the power to charge £1.30 per person per night for most accommodation from April 2027.
The Treasury has maintained its standard position regarding budget speculation, with a spokesperson stating: "We do not comment on budget speculation. The budget later this month will build stronger foundations to secure Britain's future and focus on the priorities of working people: cutting waiting lists, cutting the national debt and cutting the cost of living."
