A proposed tourist tax for overnight stays in London has the potential to generate more than £350 million in revenue each year for the capital, according to a significant new analysis.
New Powers for Mayors to Impose Visitor Levy
The findings come after the UK government announced in November 2025 that mayors across England will be granted new powers to introduce a levy on visitors staying overnight. The Mayor of London, Sadiq Khan, welcomed the move at the time, calling it "great news" that would provide extra funding to support London's economy and its status as a global destination.
The detailed analysis was conducted by Central London Forward (CLF), a partnership of 12 central London boroughs focused on driving sustainable growth. Their report is based on a hypothetical model applying a three per cent charge on top of hotel room costs.
Central Boroughs Push to Retain Revenue for Local Services
While the government is still consulting on the final design of the levy, a key debate has already emerged over how the substantial revenue would be distributed. CLF is advocating for local boroughs to retain at least 50 per cent of the funds raised within their areas.
The organisation argues that the central boroughs it represents—including the City of London, Westminster, Southwark, and Tower Hamlets—will be responsible for generating the bulk of the revenue, predicting around £275 million would come from this zone alone. This is because 71 per cent of London's hotel rooms and 67 per cent of short-term lets are located within these 12 boroughs.
However, CLF states these same areas currently bear the brunt of municipal costs associated with high visitor numbers—such as street cleaning, maintenance, and public safety—without dedicated funding to manage these tourism pressures.
Addressing the Strain of Overtourism
Cllr Adam Hug, leader of Westminster City Council and chair of CLF, emphasised the crucial role central London plays in the visitor economy. He highlighted investments in public realm projects, from the transformation of Regent Street to upgrading public facilities, but noted a fundamental unfairness.
"Many of these services for visitors are currently funded by our local residents, which is not right," Hug stated. He called on the government to legislate to ensure boroughs keep a significant share of the levy revenue to continue providing essential services.
The report underscores that while tourism delivers economic benefits, overtourism can strain local council budgets, increasing costs for public services and infrastructure without corresponding compensation. The proposed tourist tax is framed as a mechanism to ensure visitors contribute more directly to the upkeep of the city they enjoy.
The Mayor's office is awaiting the conclusion of the government's consultation before determining how London will proceed with implementing the new visitor levy.
