Regional mayors in England will be given powers to impose an uncapped overnight visitor levy on hotels, bed-and-breakfasts and holiday lets, in a move ministers say will fund local investment but critics warn will drive up the cost of family breaks.
The charge will be calculated as a percentage of the accommodation bill rather than a flat nightly fee. Labour-run areas are expected to consider a rate of about 5 per cent, meaning a £2,000 hotel stay or holiday cottage booking could cost an extra £100.
The decision has prompted accusations that the Government is imposing another tax on households already struggling with rising costs. Andrew Griffith, the shadow chancellor, said the policy amounted to “another tax raid on hardworking families” and would further damage the hospitality industry.
“His tourism tax will hammer the hospitality industry – which has already taken a beating from Labour’s business rates hikes, jobs tax and employment red tape – driving up the cost of the family holiday and discouraging people from holidaying in the UK,” he said.
Business groups said the levy could threaten jobs and weaken Britain’s competitiveness as a holiday destination. The Federation of Small Businesses described the decision to allow an uncapped percentage charge as “a kick in the teeth” for small firms facing a fresh wave of cost increases.
Allen Simpson, chief executive of UKHospitality, said: “If you only devolve one tax-raising power, local mayors are going to pull that lever till it snaps.”
Visitor levy could cost 33,000 jobs, industry warns
Analysis by Oxford Economics, commissioned by UKHospitality, estimates that a 5 per cent levy could result in 11.9 million fewer nights being spent in accommodation by 2030 and £1.8 billion less tourism spending.
The modelling also forecasts a £2.2 billion reduction in gross domestic product, a £101 million fall in hospitality and tourism investment and the loss of about 33,000 jobs. The Treasury could receive around £688 million less in tax as reduced visitor spending feeds through to the wider economy.
UKHospitality said the figures were a warning of the potential consequences rather than a prediction of precisely how every area would respond. The organisation has also argued that the levy would leave England at a disadvantage because accommodation already attracts 20 per cent VAT.
Travel association ABTA said the policy risked “further damage” to the competitiveness of local tourism, while Whitbread, the owner of Premier Inn, called the plans “hugely damaging”.
The Government said the levy would give local leaders greater control over money raised from tourism, which could be spent on high streets, public transport, events, public spaces and attractions. Ministers said the measure would help destinations manage visitor numbers and reinvest in the infrastructure on which residents and tourists depend. ([gov.uk](https://www.gov.uk/government/news/local-leaders-handed-powers-to-drive-investment-in-communities))
Angela Rayner, the Communities Secretary, said it was an opportunity for areas to “celebrate the tourism that comes to their areas” and redirect funding into local communities.
Mayors will not be obliged to introduce the charge, and will be expected to consult residents and local businesses before making a decision. The Government said local leaders would also be able to create exemptions, including for campsites, while temporary accommodation, shelters and refuges will not be covered. ([gov.uk](https://www.gov.uk/government/news/local-leaders-handed-powers-to-drive-investment-in-communities))
However, ministers have rejected calls for a national maximum rate. A summary of the consultation found that 60 per cent of respondents opposed calculating the levy as a percentage of accommodation costs, while only 21 per cent supported that approach. Most respondents also wanted a cap and opposed giving mayors sole control over the level of the charge.
The new powers are expected to become available from 2028, with legislation to establish the system due to be introduced. The Government expects mayors and leaders of Foundation Strategic Authorities to publish plans for spending the proceeds by early 2028. ([gov.uk](https://www.gov.uk/government/news/local-leaders-handed-powers-to-drive-investment-in-communities))
Andy Burnham introduced Greater Manchester’s visitor charge in 2023, with a £1 fee plus VAT per room per night. Liverpool City Region, led by his ally Steve Rotheram, has since set a £2 rate, while Edinburgh introduced a 5 per cent levy for stays of up to five nights.
Mr Rotheram welcomed the English scheme, saying a levy could raise up to £18 million a year for the Liverpool City Region, whose visitor economy is worth more than £6.8 billion annually and supports over 55,000 jobs. ([gov.uk](https://www.gov.uk/government/news/local-leaders-handed-powers-to-drive-investment-in-communities))
But opposition mayors said they would not use the power. Reform’s Greater Lincolnshire mayor, Andrea Jenkyns, said she “vehemently” opposed the proposal, while the Hull and East Yorkshire mayor Luke Campbell and Tees Valley mayor Ben Houchen have also ruled out introducing it.
Paul Bristow, the Conservative mayor of Cambridgeshire and Peterborough, said the hospitality sector was already facing higher employment costs, tax rises and other pressures.
“This is not the time to put extra costs on staying overnight,” he said.
