Mayors to be given powers to introduce tax on overnight hotel stays

Mayors across England will be given the power to introduce an added fee on overnight hotel stays, the government has confirmed.

 

The announcement from the Ministry of Housing, Communities and Local Government comes ahead of the Budget on Wednesday.

 

It said the move would ensure mayors in England “have the same powers as their counterparts in cities like New York, Paris and Milan”, where similar ’tourist taxes’ are in place.

 

The fee will apply to visitors’ overnight stays at accommodation including hotels, holiday lets and guesthouses.

 

The government said funds collected could be used by local authorities to support communities and tourist experiences.

 

It has launched a 12-week consultation on gov.uk to give businesses a chance to have their say on the plans.

 

UKHospitality said the policy was a "shocking U-turn" from the government that comes two months after former tourism minister Sir Chris Bryant told the House of Commons there were “no plans to introduce a tourism tax”.

 

Kate Nicholls, chair of UKHospitality, said: “This is a shocking U-turn that will only make life more expensive for working people. It could cost the public up to £518m in additional tax when they travel in the UK and having knock-on impacts for the wider hospitality sector.

 

“Make no mistake – this cost will be passed directly onto consumers, drive inflation and undermine the government’s aim to reduce the cost of living.

 

“It’s important that the government has paused to consult. We will be working hard with the chancellor’s team to highlight the damage this will do to the cost of living.”

 

While many destinations in Europe charge a small tax on hotel fees, guests also pay a lower rate of VAT than the 20% charged in England. UKHospitality said the addition of a 5% overnight levy, plus the VAT charged on the levy itself, would create an effective 27% VAT rate for consumers on their holidays in England.

 

The mayors of London, Liverpool City, West of England, North East, West Yorkshire, and Greater Manchester have reacted positively to the visitor levy policy, with the mayor of York and North Yorkshire David Skaith describing it as a “total gamechanger for our region”.

 

Steve Reed, secretary of state for housing, communities and local government, said: “Under plans set out today, any new levy would apply to visitors at accommodation providers including hotels, holiday lets, bed and breakfasts, and guesthouses.   

 

“Money raised could then help fund local projects that improve communities and enhance tourists’ experiences, that could potentially help attract more visitors – without needing approval from central government. Research also shows that reasonable fees have minimal impact on visitor numbers.   

 

“In London, the levy could go towards improvements to some of the capital’s busiest and famous streets to improve the experience for both visitors and Londoners, as well as supporting the city’s entertainment, sport and culture including helping smaller venues. Meanwhile in Liverpool, it could help the city to support the major events that drive visitors - such as the upcoming UEFA EURO 2028 - and improving the infrastructure that visitors and locals rely on.”

 

Edinburgh is set to become the first city in Scotland to introduce a 5% overnight tax on hotel and Airbnb-style stays next July. In Wales, councils will have the power to charge a fee of £1.30 per person per night from April 2027.

 

The government said emergency accommodation, homeless shelters and registered Gypsy and Traveller sites used as primary residences will be exempt from the charge.