Powers to introduce a tourist tax have been granted to 20 areas across England following the new Budget, covering popular destinations such as London, Manchester, Liverpool, York and Devon. Mayors and other strategic authorities can now impose a levy on overnight stays, a move that has drawn criticism from the hospitality sector, which argues it will cost jobs and raise the price of holidays for British travellers. Supporters say the tax could raise tens of millions of pounds to improve local services.
Budget announcement and affected areas
In the first Budget from Prime Minister Andy Burnham's government, Chancellor John Healey announced: "From 2028, mayors and other strategic authorities will have new powers to introduce an overnight visitors levy." The measure applies to all 20 of England's strategic authorities, 14 of which have a directly elected mayor.
The areas covered are Cambridgeshire and Peterborough, Cheshire and Warrington, Cumbria, Devon and Torbay, East Midlands, Greater Lincolnshire, Greater London, Greater Manchester, Hampshire and the Solent, Hull and East Yorkshire, Lancashire, Liverpool City Region, North East, South Yorkshire, Sussex and Brighton, Tees Valley, West Midlands, West of England, West Yorkshire, and York and North Yorkshire.
How the levy would work
Local leaders would be allowed to apply the charge as a percentage on the cost of hotels, bed and breakfasts and other accommodation. Holidaymakers would pay a percentage of their bill rather than a flat fee, so those in budget hotels would not pay the same rate as guests in luxury properties. Local leaders would have flexibility to offer exemptions, such as for campsites, while temporary accommodation, shelters or refuges would not be included.
Authorities would be free to set the rate, which has no upper limit, although it is understood that Labour's metro mayors have agreed it will not exceed five per cent. Revenue would go directly to local areas rather than the Treasury and could be used for public services, transport and investment in promoting culture and tourism. Healey told MPs the levy would sit alongside the transfer of business rates and income tax receipts to mayors, so that "more of the money that is raised locally can be invested and spent locally".
Existing tourist taxes and the debate
Manchester became the first UK city to introduce a tourist tax through its Accommodation Business Improvement District, charging £1 per room per night from April 2023 to fund measures aimed at attracting visitors. Around £2.8m was raised in its first year, and Liverpool later began a similar model. Edinburgh introduced a five per cent overnight levy this summer for the first five nights of a stay, covering hotels, B&Bs, self-catering apartments and hostels.
In London, officials have yet to decide how the scheme will work, but the charge will be no higher than five per cent. Analysis earlier this year suggested a three per cent tourist tax on overnight visitors to the capital could raise more than £350m a year. The move, not expected to come into force before 2028, would bring England in line with European destinations such as Rome, Barcelona and Paris, as well as the US and Canada.
Industry chiefs, who have lobbied heavily against the move, have criticised it. Downing Street has insisted the "overwhelming majority" of hospitality firms would not be directly affected, as the charge applies only to overnight stays and would be at the discretion of mayors and strategic authorities. The Local Government Association has warned councils in England face a £7 billion funding gap within three years.
Steve Rotheram, Mayor of Liverpool City Region, said a modest levy could generate £18 million a year that could be reinvested locally. "We're going to try and judge it so that it's not an impediment to people," he told The Mirror in September. "Within the overall cost of a weekend stay, the additional few quid that comes our way would pale into insignificance in the greater scheme of things. It'll be the price probably of a coffee or something like that." He added: "It means that when we get huge visitor numbers - and we have - then the infrastructure needs to be kept upgraded. So we want to have clean streets for when people come. We want to have a brilliant transport system for when people come. We want to have more visitor offers, so more attractions and all of that, and that's part of it."
UKHospitality said estimates suggest the levy could cost 33,000 jobs and increase tax for holidaymakers by £1.6 billion. Jon Hendry-Pickup, boss of Butlin's, warned it would "no doubt" affect investment plans for its sites. "It is a tax on UK holidaymakers," he told The Mirror last month, predicting it would harm local communities where tourism is the main source of income. "There has been no reflection of all the things we have told government throughout this process," he added. "The mayors can do whatever they want. This is a tricky situation for us because we have different mayors across the country so they can have different levies. That means more red tape and the complexity will be huge." Business travel leaders have also argued their industry should be exempt, saying those who travel for employment are not tourists.
