England’s tourist tax: What hotel operators need to know

English mayors and other local leaders are set to gain powers to introduce percentage-based levies on overnight stays. For hotels, the result could be different rates and requirements across the country.

England is moving towards a new local tourist tax that could change how hotels and other accommodation providers price, collect and report charges on overnight stays.

The Government plans to give all strategic authorities in England the power to introduce an Overnight Visitor Levy (OVL). Local leaders will decide whether to use the power, while a national framework will set out how the system operates.

For hotel operators, the key point is that this will not be a single national hotel tax automatically applied across England. Instead, the policy could create a series of local tourist taxes, with rates, exemptions and implementation dates potentially varying between destinations.

That could affect more than the amount guests pay. Hotels may also need to consider the impact on pricing, revenue management, technology, distribution and tax administration.

What is the Overnight Visitor Levy?

The OVL is a proposed local charge on paid overnight accommodation.

The Government consulted on the policy between November 2025 and February 2026. The consultation covered which types of accommodation should be included, how rates should be calculated, who should collect the levy, how revenue should be used and how the system should be administered.

The Government’s preferred model is a percentage of the accommodation cost rather than a fixed charge per person or room. Ministers argue that this would be more proportionate because visitors staying in more expensive accommodation would pay more.

The Government has since confirmed that all strategic authorities will have the ability to introduce an OVL. Areas without a mayor can establish non-mayoral strategic authorities with the option to use the power.

The distinction is important. The policy creates the power to introduce a tourist tax, rather than automatically imposing one on every hotel in England.

How much could the hotel tourist tax be?

There is currently no confirmed national rate.

The Government’s consultation considered whether a national cap should apply. Reporting around the latest announcement has focused on the possibility of levies of around 5%, but hotel operators should not treat 5% as a confirmed national rate.

The final legislation and regulations will determine the safeguards around local rate-setting.

Under a percentage-based model, the amount collected would rise with the accommodation price. If, for example, an authority ultimately imposed a 5% rate, a £200 eligible accommodation charge would generate a £10 levy, while a £400 charge would generate £20.

These figures are illustrative only.

The consultation also considered whether authorities should be able to set different rates for different types of accommodation. If adopted, that could create another layer of variation between local schemes.

Which accommodation could be covered?

The Government’s consultation proposed a broad approach covering commercially let short-term accommodation.

This included hotels, B&Bs and guesthouses, hostels, campsites and caravan parks, serviced apartments and aparthotels, self-catering accommodation and short-term lets, holiday lodges and glamping sites, as well as commercially let university accommodation and some commercially let religious accommodation.

The broad scope is significant for hotels because they increasingly compete with short-term rentals, serviced apartments and other forms of visitor accommodation.

The consultation also considered exemptions, including accommodation that is a person’s normal residence and private stays with family or friends where there is no commercial transaction.

The precise scope and exemptions will depend on the final legislation and regulations.

Business travel could also be affected

The proposed levy is not intended to apply only to leisure visitors.

The Government’s consultation proposed bringing both business and leisure travellers within scope, arguing that business visitors also use local infrastructure and that excluding them could add complexity.

That could be significant for hotels with substantial corporate, meetings and events business.

Sales teams may need to account for the levy when negotiating corporate rates, while revenue managers will need to consider its effect on the customer’s total accommodation cost.

Group and conference organisers may also want clarity on how the charge will appear on bills and whether it will be incorporated into agreed rates.

Who will collect the tourist tax?

The Government’s consultation proposed making the accommodation provider ultimately responsible for ensuring that the levy is collected and paid to the relevant authority.

It also proposed a self-assessment model, under which providers would calculate the amount due and remit it. Booking platforms could potentially play a role in calculation or collection, but the precise arrangements have not yet been finalised.

The consultation envisaged the cost normally being passed on to the visitor, although providers could decide whether and how to do so.

This creates an important distinction for hotel operators: the guest may bear the economic cost of the levy, while the hotel carries the administrative responsibility.

What could it mean for hotel technology?

The implications could extend well beyond the final guest bill.

Hotels may need their property management, booking, payment and accounting systems to identify eligible stays, calculate the appropriate levy and retain the information required for reporting.

A percentage-based levy could create particular challenges because room prices vary according to demand, season, length of stay, discounts and booking channel.

The consultation also examined how the charge should work when accommodation is sold as part of a package containing other elements, such as meals, entertainment or transport.

Online travel agencies (OTAs) and other booking intermediaries could also have a role. The Government has sought views on how digital platforms could be incorporated into assessment, collection and reporting.

For hotel groups, system configuration could become particularly important if different strategic authorities adopt different rates or exemptions.

How could the tourist tax affect hotel pricing?

The levy could change the relationship between a hotel’s room rate and the customer’s final accommodation cost.

Hotels could pass the charge on to guests or potentially absorb some or all of it, depending on the final rules and commercial circumstances.

The decision is likely to depend heavily on market positioning.

A luxury property may have greater scope to pass on a relatively small percentage without materially affecting demand. A budget hotel competing closely on price could face a different calculation.

Geography will also matter. A hotel subject to a levy could compete with properties in a neighbouring authority where no levy applies or where a lower rate has been introduced.

The OVL could therefore become another variable for revenue managers to consider when setting prices and assessing competitors.

Could different regions have different rules?

Yes. Local flexibility is central to the proposed system.

An authority could introduce a levy while a neighbouring area chooses not to. Authorities using the power could also potentially adopt different rates and exemptions within the national framework.

For an independent hotel operating in one destination, complying with a single local scheme may be relatively straightforward.

For regional and national groups, the implications could be greater. Finance, revenue management, reservations and technology teams may need to keep multiple properties aligned with different local requirements.

The challenge may not be calculating the levy itself. Modern hotel systems can accommodate different rates.

The bigger issue could be ensuring that the correct rate, exemptions, guest communications and reporting requirements are consistently applied at each property and across distribution channels.

How much notice will hotels receive?

The Government’s consultation proposed a minimum 12-month notice period before a levy is introduced.

It also proposed proportionate notice for subsequent changes to the rate or scope, balancing local flexibility with businesses’ need for predictability.

If retained in the final framework, this should give operators time to adapt their systems and commercial processes before a levy becomes payable.

Such a lead time could be particularly important for hotel groups that need to coordinate changes across reservation, finance and distribution systems.

Where will the tourist tax money go?

The OVL forms part of the Government’s wider devolution programme, giving local leaders another means of raising revenue for local priorities and economic growth.

Revenue could support transport, public spaces, attractions, cultural programmes, infrastructure and the wider visitor economy.

Supporters argue that hotels could ultimately benefit if money raised from visitors is reinvested effectively in the destinations and infrastructure on which tourism depends.

For operators, a key question will be whether there is a clear link between the revenue collected and improvements to the destination and visitor experience.

What does the hotel industry say?

Hospitality organisations have raised concerns about the effect of a tourist tax on demand, competitiveness, employment and operating costs.

UKHospitality has argued that an uncapped percentage-based levy could increase the cost of overnight stays and create additional administrative work for businesses.

Oxford Economics modelling commissioned by the trade body estimates that a 5% levy scenario could result in 33,000 fewer jobs and a £2.2bn reduction in economic output.

These are industry-commissioned projections rather than Government forecasts and are based on a specific 5% scenario.

The Government and supporters of visitor levies take a different view, arguing that local leaders should be able to raise revenue from visitors and reinvest it in their destinations.

Existing schemes offer some context, although direct comparisons are difficult.

Manchester introduced a £1-per-room, per-night visitor charge in 2023, raising millions of pounds for visitor-related investment. Liverpool has also introduced a visitor charge to support cultural, sporting and tourism activity.

These examples do not establish what effect England’s proposed percentage-based system will have on demand. Much will depend on the rates chosen, the design of individual schemes and how revenues are used.

What can hotels learn from Wales and Scotland?

England is not the first part of the UK to introduce visitor levy powers.

Wales has established a statutory visitor levy framework under which individual local authorities can choose whether to introduce a charge. Cardiff is due to introduce its levy from 1 April 2027.

The Welsh model also illustrates the administrative responsibilities that can accompany a visitor levy, including registration, record keeping, calculation, returns and payment.

Scotland has introduced its own local visitor levy powers, with Edinburgh among the first authorities to use them.

Neither system is identical to the proposed English model, but both offer useful examples of the operational considerations accommodation businesses can face when visitor levies are introduced.

What should hotel operators do now?

Hotels do not yet have a final English OVL system to implement. The immediate priority should therefore be monitoring and preparation, rather than changing guest bills.

Operators should:

• identify the strategic authority covering each property and monitor its announcements and consultations;
• assess how different percentage rates could affect room pricing and competitive positioning;
• review whether property management, booking, payment and accounting systems can accommodate a locally varying levy;
• consider the potential effect on corporate, group and meetings rates;
• monitor how OTAs and other distribution partners prepare to handle the charge; and
• participate in local consultations where possible.

Hotel groups should also map their portfolios against the emerging strategic-authority structure to identify where different levy regimes could eventually apply.

The proposed consultation process would give accommodation businesses and industry bodies an opportunity to comment before individual schemes are introduced.

When will the new tourist tax take effect?

Hotels are not required to start collecting an English Overnight Visitor Levy now.

The Government’s current timetable points towards the new power becoming available towards the end of the 2027–28 financial year.

The actual introduction date for any hotel will depend on whether its strategic authority chooses to introduce a levy and the implementation timetable that follows.

Hotel operators therefore have time to prepare, but the issue is moving closer to becoming an operational consideration.

What the tourist levy means for hotels

For hotel operators, the biggest issue is not simply how much a guest might eventually pay. It is how the system will work across England.

A well-designed levy could provide destinations with additional funds for infrastructure, services and attractions that support tourism. A fragmented system of different rates, exemptions and administrative requirements, however, could add complexity to hotel pricing, technology, finance and distribution.

The final legislation will therefore be critical.

Operators should watch four areas particularly closely: rate-setting, scope and exemptions, collection and reporting requirements, and the degree of local flexibility.

Those decisions will ultimately determine whether England’s tourist levy becomes a useful source of investment in the visitor economy or another cost and compliance challenge for hotels.