British holidaymakers may face a nightly tax on hotel stays and Airbnb-style visits under plans expected to be announced by Chancellor Rachel Reeves in the upcoming budget. The move would give mayors the power to raise funds through levies on overnight stays in their cities, potentially generating hundreds of millions of pounds for transport and public services.
The hospitality industry has warned that such a tax would increase costs and inflation. UKHospitality, a trade body representing restaurants, hotels, and pubs, estimates that a 5% tourism tax—similar to the rate set by Edinburgh from next July—would result in an effective consumer tax of 27% when combined with standard 20% VAT. This would cost Britons an additional £518 million annually.
Kate Nicholls, chair of UKHospitality, criticised the plan, stating: “I know the government is worried about the cost of living, but this holiday tax is little more than a higher VAT rate for holidaymakers. Brits take more than 89 million overnight trips in England, and stay for a total of 255 million nights. This is a bill we will all have to pay, and will only serve to ramp up prices and drive inflation.”
Government sources told The Times that England is an outlier among developed countries for not having a tourism tax. Similar levies are being introduced by the devolved Scottish and Welsh governments. The changes will be implemented through amendments to the English devolution and community empowerment bill, currently going through parliament.
Earlier this summer, a coalition of mayors, including London Mayor Sadiq Khan and Greater Manchester Mayor Andy Burnham, urged the government to introduce a visitor levy. They argued that a £1 to £5 per night charge in Greater Manchester could raise between £8 million and £40 million annually for infrastructure projects such as the regeneration of Old Trafford or airport development.
Edinburgh is set to become the first Scottish city to introduce a 5% tourist tax next July, following legislation passed last year. In Wales, councils will have the power to charge £1.30 per person per night from April 2027. The chancellor is also expected to introduce a “milkshake tax” by ending the exemption for milk-based drinks from the sugar tax, potentially raising between £50 million and £100 million.
