England moves toward tourist tax as hotel industry warns of fallout

MANCHESTER, England (CN) — Tourists in England could soon have to pay a tax on overnight accommodation, as the British government considers the move that could raise tens of millions of dollars a year but has triggered sharp warnings from the tourism industry.

Under proposals outlined in a government consultation that closed in February, mayors would gain the power to introduce a “visitor levy” on hotels, hostels and short-term rentals in their regions.

Local leaders would decide whether to impose the charge and how much to ask, meaning the tax could vary widely across England, or not appear at all in some areas.

The government says the levy could help cities reinvest tourism revenue into infrastructure, public transport and services used by both residents and visitors.

Tourism is a major employer in Britain, accounting for approximately 5% of the total economy. Hospitality groups say the levy risks making holidays more expensive while policymakers argue the money could help cities manage the pressures created by large numbers of visitors.

A tourist tax, which is common across Europe, is typically charged per person or per room for each night of a stay. Governments often use the revenue to maintain tourist areas, fund transport or support cultural projects.

In England, local authorities currently lack the legal power to introduce such a tax.

The consultation proposes granting that authority to directly elected metro mayors, regional leaders responsible for economic development, transport and housing in major city regions.

If ministers decide to proceed, Parliament would need to pass legislation. That means any levy is unlikely to appear before 2027.

Industry warns of higher costs

Hospitality leaders have urged ministers to drop the plan.

In a letter to Chancellor Rachel Reeves, 200 hospitality and leisure executives, including Butlin’s, Hilton and Travelodge, warned the policy could deter families from holidaying in Britain.

“This ‘holiday tax’ will hit families hardest, puts jobs at risk, drain money from local businesses and communities and undermine the government’s growth agenda,” the group wrote.

They argued that British tourism already faces higher taxes than competitors in Europe, noting that the U.K.’s 20% value-added tax on hospitality is roughly double the rate in countries such as France, Italy and Spain.

The group warned higher costs could push travelers to shorten trips, cut spending in restaurants and attractions or travel abroad instead.

Allen Simpson, chief executive of the trade group UKHospitality, echoed those concerns.

“Holidays are for relaxing — not taxing,” he said. “You’re already paying your fair share of tax.”

Hotels brace for operational impact

Some hotel managers say the levy could add administrative complexity even if the financial impact is modest.

Martyn Wright, revenue manager at The Corner London City hotel, said businesses would have to track and process the tax on every booking.

“The main impact we will see is the additional operational demands of managing the levy,” Wright said.

He also warned that online booking platforms could take commission on the tax itself, increasing costs for hotels.

Wright said higher prices could influence where visitors choose to stay.

An average night stay in London is around $345 per night, he says. That’s $1,380 for a 4-night stay in the capital. Based on a suggested 5% tourist tax, the guest would pay an extra $70.

“These costs will make the guest think twice,” Wright said.

He added that if the funds were put back into the city to improve its infrastructure, it would be a benefit.

However, “The concern at the moment we are hearing from our hoteliers is that the funds raised from the levy will not be reinvested into infrastructure for the city.”

Experts say levy could benefit communities

Tourism researchers say the impact depends largely on how the revenue is used.

Linda Osti, a senior lecturer in tourism management at Bangor University in Wales, said visitor taxes can help cities manage the strain tourism places on local services.

“The English government has proposed a visitor levy intended to support local leaders in driving economic growth and making their places more desirable to visit, live and do business,” she said.

Osti said international examples show the money can support community projects, not just tourism marketing.

In Gunnison County, Colorado, tourism tax revenue has funded business incubator programs designed to diversify the local economy. In Teton County, Wyoming, some funds support public transport used by both tourists and residents.

Other regions have used the revenue to address housing shortages or environmental pressures created by tourism.

Still, Osti said the tax alone cannot solve overcrowding in popular destinations.

“The effectiveness of a visitor levy depends less on the existence of the tax itself than on the governance structures through which the revenues are administered,” she said.

She said many successful destinations create dedicated bodies, often public-private partnerships, to manage the funds and decide how they are spent locally.

Osti added that visitor levies can also influence travel patterns if designed carefully. For example, cities can vary charges by season or limit the tax to the first few nights of a stay, encouraging longer visits and spreading tourism beyond peak periods.

Scotland and Wales moving ahead

Elsewhere in the U.K., regional governments have already authorized local tourist taxes.

In Scotland, Edinburgh will become the first city to introduce a levy. Visitors booking accommodation for stays after July 24 will pay a 5% charge.

Glasgow plans a similar levy beginning in 2027, which officials estimate will average about $6 per night and raise about $21 million annually.

The Scottish system requires councils to spend the money on projects linked to tourism and visitor services.

Wales has also approved legislation allowing local authorities to introduce a visitor tax, although it is not expected to take effect until 2027.

Manchester offers early test

England has already experimented with a version of the policy in the U.K.’s third-most-visited city.

Manchester introduced a voluntary “city visitor charge” in April 2023 through a partnership in which local businesses fund shared projects.

Hotels in the city center charge guests $1.33 per room per night. The scheme raised $3.7 million in its first year.

Local officials say the money funded marketing campaigns designed to attract visitors during quieter months.

Greater Manchester Mayor Andy Burnham has long argued cities should have formal powers to introduce tourist taxes.

He says visitors already pay similar charges when traveling to cities across Europe.

Manchester attracts about 1.5 million international visitors each year and about 5 million domestic overnight visitors, behind London and Edinburgh.

City officials hope to grow the visitor economy from $12.5 billion in 2023 to $20 billion annually by 2030.

Common worldwide

Tourist taxes are widespread globally.

In the U.S., cities often impose lodging or occupancy taxes on hotel stays. These charges are typically added as a percentage of the room rate.

In Houston, combined state and local taxes can reach about 17%. Los Angeles charges roughly 15.5%, while New York City collects about 14.75% plus a $3.50 nightly fee per guest.

Across the European Union, cities often use flat nightly charges.

Amsterdam charges a tax of 12.5% of a hotel booking. Paris charges between 2.60 euros for hostels and more than 15 euros for luxury hotels. Rome collects up to 10 euros per person per night for five-star accommodation.

Supporters say such levies allow cities to reinvest tourist spending back into the places visitors come to see.

But with Britain’s tourism sector warning about rising costs, the government’s next move could determine whether England joins that global trend.

Courthouse News reporter James Francis Whitehead is based in England.

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