Chancellor Rachel Reeves is expected to use the 26 November budget to let elected mayors in England introduce a local “tourist tax” on hotel and short-term rental stays, bringing England into line with Scotland, Wales and many European destinations.
Under plans reported by several UK media outlets, mayors would be able to apply a nightly levy on accommodation such as hotels, guest houses and Airbnb-style rentals, with revenue ringfenced for transport, public services and local infrastructure.
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The powers are due to be created through amendments to the English Devolution and Community Empowerment Bill currently before Parliament.
Local leaders would then decide whether to introduce a visitor levy, what rate to set and how to use the funds in their cities or regions.
Government sources have argued that England is an outlier among developed economies for not already having a tourism tax, pointing to widespread use of hotel taxes across Europe and in other OECD countries.
For the global hotel industry, the move would mark a significant shift in the tax landscape of the English market. Until now, visitors have paid 20% value added tax (VAT) on accommodation but no specific hotel or tourist tax in most of England’s major destinations.
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By GlobalDataHow the proposed UK tourist tax would work
While the Treasury has not confirmed detailed design, discussion so far has centred on a percentage levy on the cost of an overnight stay, similar to the visitor levy already agreed in Edinburgh and the model being developed for Welsh destinations.
In Edinburgh, a 5% charge on the pre-VAT cost of paid overnight accommodation will apply from 24 July 2026, capped at the first five nights of a stay and covering hotels, serviced apartments, guest houses, hostels and short-term lets.
In Wales, legislation passed this year will allow councils to introduce a fixed-amount visitor levy from April 2027. Draft guidance suggests a charge of £1.30 per person per night for most accommodation types and 75p for campsites and shared rooms, with local authorities free to opt in or out.
English mayors including Sadiq Khan in London and Andy Burnham in Greater Manchester have lobbied for similar powers.
In a joint letter earlier this year they argued that a levy of £1–£5 per night in Greater Manchester alone could raise £8m–£40m annually, helping to fund projects such as stadium regeneration and airport-linked infrastructure.
For hotel and lodging operators, the practical issues will include how the levy is shown on guest bills, how it interacts with VAT, and whether local authorities permit a share of receipts to offset collection costs, as planned in Edinburgh.
Concerns from hotels, Airbnbs and tourism bodies
Industry groups have reacted with concern, warning that a new tourism tax on English hotels and Airbnbs could push prices higher at a time of weak consumer demand and elevated operating costs.
UKHospitality, which represents hotels, restaurants, pubs and other venues, has calculated that a 5% levy similar to Edinburgh’s would create an “effective” consumer tax rate of around 27% once VAT is applied both to the room rate and to the levy itself.
The trade body estimates this would add about £518m a year to the cost of domestic trips for British travellers.
The sector argues that such a hotel tourist tax could intensify inflationary pressures, with higher accommodation prices feeding into broader measures of service inflation.
UKHospitality and individual operators have also warned that international visitors already compare UK room rates and VAT levels with those in rival destinations, and that a new england tourist tax risks weakening competitiveness, especially outside peak season.
Some business groups and commentators have gone further, predicting that a visitor levy could lead to lower occupancy, reduced investment and job losses in parts of the hospitality supply chain.
Industry-backed analysis cited in political debate claims that higher transaction taxes on tourism may cut consumer spending in local economies and offset some of the extra revenue for councils, although these findings are contested by advocates of tourist levies.
Airbnb hosts and operators of serviced apartments have raised similar concerns, noting recent regulatory changes on short-term lets and warning that a new Airbnb tourist tax could encourage more activity to move to unregistered or informal channels unless enforcement is consistent across platforms.
England catching up with Edinburgh, Wales and other visitor levy models
Supporters of the policy, including some thinktanks and local government leaders, argue that a modest uk tourist tax is a normal feature of mature visitor economies and can help manage the pressures that tourism places on city centres and popular districts.
The Institute for Government has said there is no “in principle” objection to taxing tourists and that local visitor levies, if designed well, can give councils a stable revenue stream to maintain public spaces, fund transport and manage peak-season crowding.
Internationally, hotel taxes are already established in cities such as Amsterdam, Berlin, Barcelona and Paris, where guests typically pay a small per-night fee or a percentage of the room price on top of VAT or sales tax.
Revenues are often dedicated to city marketing, cultural events, public transport or environmental projects.
In the UK, Edinburgh’s 5% visitor levy and the forthcoming Wales tourism tax will provide the first live case studies in how such charges affect hotel demand, average daily rates and guest behaviour.
The Scottish scheme is expected to raise up to £50m a year, with funds earmarked for infrastructure, tourism facilities and cultural events, while Welsh ministers describe their own levy as a “small contribution” to help maintain destinations for visitors and residents.
For global hotel brands, independent operators and short-term rental platforms, the key questions in England will be:
- whether mayors adopt a percentage model like the Edinburgh visitor levy or a flat nightly hotel charge similar to the proposed Wales visitor levy
- how high any England tourist tax rates are set in major markets such as London, Manchester, Birmingham and Liverpool
- whether revenues are transparently reinvested in tourism-related services that benefit guests and local communities
Alongside the proposed holiday tax, the chancellor is also expected to expand the UK sugar tax by ending exemptions for milk-based drinks such as bottled milkshakes and some coffee beverages.
The threshold for the soft drinks industry levy may also be lowered from 5g to 4g of sugar per 100ml, a change that could raise £50m–£100m a year.
The Treasury has declined to comment on “budget speculation”, saying only that the autumn statement will focus on cutting waiting lists, reducing national debt and easing the cost of living.
For hotel and lodging businesses operating in the UK market, attention will now turn to the budget to see how far the government goes in reshaping the tax environment for domestic and international tourism.
