Chancellor Rachel Reeves is reportedly set to announce plans in the upcoming budget to grant mayors in England the power to impose a nightly tax on hotel stays and Airbnb-style accommodation. The move, expected on 26 November, aims to raise hundreds of millions of pounds for local transport and public services, but has drawn criticism from the hospitality industry.
UKHospitality, representing restaurants, hotels, and pubs, warned that a 5% tourism tax—similar to one Edinburgh will introduce next July—would result in an effective consumer tax rate of 27% when combined with 20% VAT. The trade body estimates this could cost Britons an additional £518 million annually. Kate Nicholls, chair of UKHospitality, said: '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.'
Government sources argue England is an outlier among developed nations without such a tax, which is already being introduced in Scotland and Wales. The changes would be made via amendments to the English devolution and community empowerment bill. A coalition of mayors, including Sadiq Khan of London and Andy Burnham of Greater Manchester, previously urged the government to introduce a visitor levy, suggesting a £1 to £5 nightly charge in Greater Manchester could raise £8m to £40m annually for infrastructure projects.
In addition, Reeves is expected to announce a 'milkshake tax' by ending the exemption for milk-based drinks from the sugar tax. The soft drinks industry levy currently applies to drinks with 5g or more of sugar per 100ml, and the threshold may drop to 4g, raising between £50m and £100m. A Treasury spokesperson declined to comment on budget speculation, stating the budget will focus on cutting waiting lists, national debt, and the cost of living.
