Chancellor John Healey (left) and Prime Minister Andy Burnham (right) (Image: Getty)

The move has sparked frustration in the hospitality sector which says the levy will cost jobs and raise the costs of holidays for Brits, but the tax could raise tens of millions of pounds to improve local services across the country.

In the first Budget from Prime Minister Andy Burnham’s government, Chancellor John Healey announced yesterday: “From 2028, mayors and other strategic authorities will have new powers to introduce an overnight visitors levy.”

Chancellor John Healey delivered the Autumn Budget this week (Image: Getty)

Local leaders across England will also be given freedom to set the rate, which has no upper limit, but it is understood that Labour’s metro mayors have agreed it won’t exceed five per cent. The revenue will be funnelled directly to local areas rather than the Treasury, and could go towards public services, transport and investment in promoting culture and tourism.

The levy comes as part of a package of measures in the Budget to devolve tax revenues, as Healey told MPs the levy would sit alongside the transfer of business rates and income tax receipts to mayors. These moves could provide long-term methods of funding local infrastructure, so that “more of the money that is raised locally can be invested and spent locally”.

Around £2.8m was raised in its first year, and Liverpool then began to follow a similar model.

A five per cent overnight levy was also introduced in Edinburgh this summer for the first five nights of a stay, applying to everything from hotels and B&Bs, to self-catering apartments and hostels.

In London, officials are yet to make a decision on 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, which is not expected to come into force before 2028, would bring England in line with popular holiday destinations Europe like Rome, Barcelona and Paris, as well as the US and Canada.

Downing Street has insisted the “overwhelming majority” of hospitality firms would not be directly affected as the charge only applies to overnight stays – and would be at the discretion of mayors and strategic authorities.

Meanwhile, the Local Government Association has warned councils in England are facing a £7 billion funding gap within three years – more than what councils spend on roads, transport, homelessness and housing services combined.

Steve Rotheram, Mayor of Liverpool City Region, said that a modest levy could generate £18 million-a-year that could be poured back into his area.

“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 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.”

But industry bosses have warned it could put off visitors and hammer hospitality and tourism businesses. UKHospitality said estimates suggest it could cost 33,000 jobs and increase tax for holidaymakers by £1.6 billion.

“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 that their industry should be exempt, saying those who travel as part of their employment are not tourists.

The 20 UK Areas That Could Implement New ‘Tourist Tax’ Slammed by Hospitality Bosses

Tourism businesses across the United Kingdom have raised serious concerns about proposals to introduce a new tourist tax in 20 areas, warning that the additional charge could make holidays more expensive and discourage visitors from travelling to popular destinations. The proposal has reignited a debate about how local authorities should fund tourism infrastructure, maintain public spaces and manage the growing number of visitors to Britain’s most popular attractions.

A tourist tax is a charge imposed on visitors who stay overnight in hotels, guesthouses, holiday apartments and other forms of paid accommodation. The money collected is generally intended to support local services, improve tourist facilities and help destinations manage the costs associated with welcoming large numbers of visitors.

Supporters argue that tourists should make a financial contribution towards the infrastructure and public services they use. Popular destinations must regularly invest in street cleaning, waste collection, public transport, parks, cultural attractions and other facilities. Local taxpayers often bear a significant proportion of these costs, even when visitors account for a substantial share of demand.

However, hospitality businesses believe introducing another charge could create additional difficulties for an industry already dealing with rising wages, energy bills, business rates and operating expenses.

The proposal has attracted particular attention because of the number of UK destinations that could potentially introduce such a scheme. Areas under discussion include major cities, historic tourist centres and popular coastal destinations.

Among the locations frequently mentioned in discussions about visitor levies are:

1. London
2. Manchester
3. Liverpool
4. Birmingham
5. Bristol
6. Oxford
7. Cambridge
8. Bath
9. York
10. Edinburgh
11. Glasgow
12. Cardiff
13. Belfast
14. Newcastle
15. Brighton and Hove
16. Canterbury
17. Stratford-upon-Avon
18. Cornwall
19. Lake District
20. Blackpool

The precise arrangements would depend on the decisions and legal powers available to individual local authorities. Not every location would necessarily introduce a charge, and the inclusion of an area in policy discussions does not mean that a tourist tax has already been approved.

Hospitality bosses have warned that additional accommodation charges could make British holidays less competitive. Hotels and guesthouses are concerned that visitors may choose destinations where overnight stays are cheaper, particularly when families are already attempting to reduce their holiday spending.

For businesses operating in popular tourist areas, even a relatively small additional charge could influence booking decisions. Customers may compare accommodation prices more carefully, particularly when travelling with children or staying for several nights.

The hospitality industry also argues that accommodation providers could face additional administrative responsibilities. Hotels may need to collect the levy, explain the charge to customers and transfer payments to local authorities. Businesses would want clear guidance to ensure that the system operates efficiently.

Another concern is the possible impact on international tourism. Britain competes with numerous European destinations for overseas visitors. Cities such as Paris, Amsterdam and Barcelona already operate different forms of tourist taxation, but industry representatives argue that introducing additional charges in the UK could make travel more expensive at a time when attracting international visitors remains economically important.

Nevertheless, supporters of tourist taxes believe that the financial contribution could help destinations become more sustainable. Popular tourist centres often experience significant pressure during peak seasons, when large numbers of visitors place additional demands on local infrastructure.

Revenue from a visitor levy could potentially support improved public transport, better waste management, conservation projects and the maintenance of historic buildings. It could also help local communities benefit more directly from the economic activity generated by tourism.

The issue is particularly important in cities with internationally recognised attractions. Places such as Bath, Oxford, Cambridge and York attract millions of visitors, many of whom stay in local accommodation and use public facilities. A carefully designed levy could provide additional funding for services that benefit both residents and tourists.

However, the central question is how the money would be collected and spent. Hospitality representatives want guarantees that revenue generated by visitors will be reinvested in tourism infrastructure rather than absorbed into general council budgets.

They also argue that any system should be transparent, proportionate and designed in consultation with businesses. Smaller independent hotels and family-run guesthouses could face different challenges from large international hotel chains, particularly when administrative resources are limited.

There are also concerns about the potential impact on domestic tourism. British families who choose to holiday within the UK may already face high accommodation prices, transportation costs and restaurant bills. An additional overnight charge could make some destinations less affordable, potentially encouraging people to shorten their holidays or travel less frequently.

On the other hand, local authorities face growing financial pressures. Maintaining tourist attractions, managing busy public spaces and providing adequate infrastructure requires substantial resources. Councils argue that a visitor levy could provide a dedicated source of funding without placing the entire burden on local taxpayers.

The debate therefore involves two important economic considerations: protecting the competitiveness of the hospitality industry and ensuring that popular destinations have sufficient resources to manage tourism responsibly.

Ultimately, the success of any tourist tax would depend on its design. A modest charge with clear spending commitments might be accepted by some visitors, particularly if the money visibly improves the destination. However, poorly designed arrangements could create resentment among tourists and additional financial pressure on accommodation businesses.

In conclusion, proposals to introduce tourist taxes across 20 UK areas have exposed a growing disagreement between local authorities and the hospitality industry. Supporters believe visitors should contribute towards the costs of maintaining popular destinations, while business representatives fear that additional charges could discourage bookings and damage the competitiveness of British tourism. As discussions continue, councils will need to consider the economic consequences carefully and consult businesses before making decisions. The ultimate challenge is to ensure that tourism remains affordable and attractive while providing sufficient funding to protect the places that millions of people visit every year.

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