The Prime Minister has been warned the bill could hit ‘hard working families’ the hardest (Image: Getty)
Andy Burnham has been warned his “shocking” plans to hand UK mayors holiday tax powers will land British holiday makers with a tax bill of £1.6billion. The Visitor Levy Bill, introduced by Parliament on Wednesday, will give local leaders authority to impose a levy on visitors staying overnight in their area, in “the most significant step in making fiscal devolution a reality” the Government said.
Ministers insisted the percentage-based levy would keep costs low, with 10 regional mayors committed to keeping charges at 5% of overall, standard fees or below. Economic analysis by Oxford Economics found that a 5% tax would cost UK holiday spots 33,000 jobs and increase tax for holidaymakers by £1.6billion, however.
Allen Simpson, chief executive of UKHospitality, said: “It’s genuinely shocking to see the Government bring forward legislation to hike the cost of a family holiday and risk 33,000 jobs, because that’s exactly what its Holiday Tax Bill will do.” He warned that mayors will be able to hike taxes for British visitors “then spend the funds on whatever they like, with no legal requirements to even use the funds to benefit hospitality”.
“It is hard-working families that will be forced to pay more for their summer break to prop up local government finances,” he added. “It is people in coastal and rural communities that rely on hospitality and tourism who will lose their jobs.
“It is not normal to have this level taxation on a holiday. The UK’s 20% VAT is already the third highest in Europe, and this holiday tax will make it even worse.”
British holidaymakers could be saddled with a hefty tax bill (Image: Getty)
The Government has said the Visitor Levy Bill would enable the collection of small fees to be reinvested locally in high streets, public spaces and tourist attractions. The overnight levy on customers staying in accommodation such as hotels and B&Bs was announced by Mr Burnham in September.
Chancellor John Healey also confirmed the new powers for mayors and strategic authorities starting in 2028 in the Autumn Budget. The Government said the legislation is part of its commitment to drive “good growth in every postcode”, including through the high streets strategy and wider plans to “rewire the state” and shift power from Whitehall to local communities.
Details confirmed in the Bill for the first time include who will be protected, how decisions will be made locally, and how the rules will be enforced. The levy will only apply to the first 28 consecutive days of a stay, as longer periods would count as long-term accommodation.
People who only rent out a spare room occasionally will only pay the levy if they earn above a set amount, with local leaders able to adjust this threshold to reflect the local tourism market.
The Ministry for Housing, Communities and Local Government said: “This Visitor Levy Bill […] marks the most significant step in making fiscal devolution a reality, giving mayors and leaders who know their areas best the ability to introduce a small fee on overnight stays.
“Money raised through the levy will stay in the local area, giving communities investment in the places and services used by visitors and residents.”
Andy Burnham Warned ‘Shocking’ Holiday Tax ‘Will Cost Brits £1.6bn’
Andy Burnham is facing growing criticism over Labour’s controversial holiday tax plans, with hospitality leaders warning that the new levy could cost British holidaymakers an additional £1.6 billion and put thousands of jobs at risk.
The proposed Visitor Levy Bill would give mayors and local leaders across England the power to introduce a tax on overnight accommodation, including hotels, bed and breakfasts and holiday rentals. Although ministers insist the measure will provide additional funding for local communities, critics argue that it will make British holidays more expensive at a time when millions of families are already struggling with the cost of living.
The warning has created another political headache for Burnham, whose government is attempting to balance its promises to support economic growth with demands from local authorities for additional funding.
For the tourism industry, however, the concern is straightforward: increasing the cost of accommodation could discourage people from taking holidays in Britain, damage local businesses and threaten employment in some of the country’s most popular tourist destinations.
A £1.6 Billion Warning for British Holidaymakers
The most alarming figure comes from an economic analysis by Oxford Economics commissioned by UKHospitality.
According to the research, introducing a five per cent visitor levy across England could generate approximately £1.6 billion in additional tax payments from holidaymakers.
However, the same analysis warns that the additional cost could have serious consequences for the hospitality and tourism industries.
The modelling estimates that a five per cent levy could put approximately 33,000 jobs at risk by 2030.
It also forecasts a reduction of around £2.2 billion in GDP associated with tourism-related economic activity.
These figures have intensified opposition to the policy, with industry representatives arguing that the government is introducing another financial burden on businesses and consumers.
Allen Simpson, chief executive of UKHospitality, described the legislation as genuinely shocking.
He warned that hard-working families would ultimately be forced to pay more for their summer holidays while businesses in coastal and rural communities could suffer from reduced demand.
For families already facing expensive accommodation, transport and food costs, even a relatively small additional charge could influence their decision about where to spend their holidays.
How Will the New Holiday Tax Work?
Under the Visitor Levy Bill, mayors and strategic authority leaders in England will be able to introduce a charge on overnight accommodation.
Unlike a traditional flat-rate tourist tax, the proposed system will operate as a percentage of the accommodation price.
This means the amount paid will depend on how much visitors spend on their accommodation.
For example, if a local authority introduces a five per cent levy, a family paying £1,000 for accommodation could face an additional £50 charge.
A more expensive holiday costing £2,000 could attract an additional £100.
The government argues that percentage-based charges are fairer because people staying in cheaper accommodation will pay less than visitors booking luxury hotels.
The levy will apply to the first 28 consecutive days of a stay, while certain types of accommodation, including student accommodation, care homes and children’s homes, will be exempt.
Mayors will also have considerable discretion over whether to introduce the charge and what rate to apply.
Although several Labour mayors have indicated that they intend to keep their initial rates at five per cent or below, critics are concerned that the legislation does not establish a binding national maximum.
This means future local leaders could potentially increase the charge.
Hospitality Businesses Fear a Tourism Crisis
The hospitality industry has warned that the new tax could have consequences far beyond the additional money paid by holidaymakers.
Hotels, holiday parks, restaurants and smaller accommodation providers depend on maintaining competitive prices to attract customers.
If overnight stays become more expensive, some families may choose to travel abroad, reduce the length of their holidays or avoid certain destinations altogether.
This could be particularly damaging for coastal communities where tourism provides a substantial proportion of local employment.
Businesses in Cornwall, Devon, Norfolk and other popular holiday destinations depend heavily on visitors during the summer season.
However, many also rely on visitors during quieter months to maintain employment throughout the year.
If the levy reduces demand during these periods, businesses could find it harder to remain open and retain staff.
UKHospitality has warned that smaller businesses may be particularly vulnerable because they have fewer financial resources to absorb additional costs.
The organisation has also questioned why accommodation providers should be responsible for collecting and administering another tax when many are already dealing with rising operating expenses.
Labour Says the Money Will Benefit Local Communities
The government has strongly defended the policy, arguing that the visitor levy will give local leaders an important new source of funding.
Ministers believe popular tourist destinations should have greater opportunities to raise money from overnight visitors and reinvest it in the places that attract them.
The proposed funding could support improvements to public transport, parks, public toilets, high streets, cultural attractions and other local facilities.
The government argues that visitors benefit from these services and should make a modest contribution towards maintaining them.
The Ministry of Housing, Communities and Local Government has described the legislation as an important step towards greater financial devolution.
Under this approach, decisions about local funding would increasingly be made by elected mayors and regional leaders rather than central government.
Supporters also point out that tourist taxes already operate in several European countries and international destinations.
Cities including Paris, Amsterdam and Berlin have introduced accommodation charges to help fund local services and tourism infrastructure.
However, critics argue that the economic circumstances of British holiday destinations must be considered before introducing additional charges.
A tax that might be manageable in a major international city could have a different impact on a small coastal resort that depends heavily on affordable domestic holidays.
Families Could Face Higher Holiday Bills
The timing of the proposal has also attracted criticism.
British households continue to face pressure from housing costs, energy bills, food prices and other essential expenses.
For many families, a domestic holiday represents an affordable alternative to travelling overseas.
However, the introduction of a visitor levy could make some traditional British holiday destinations more expensive.
A family spending £2,000 on accommodation could pay an additional £100 under a five per cent scheme.
Although this may appear relatively modest, the total cost of a holiday also includes petrol, train tickets, meals, entertainment and activities for children.
When these expenses are combined, families may decide that staying at home or choosing a cheaper destination is the more sensible financial decision.
The concern is that the policy could particularly affect lower-income households, who are more sensitive to increases in accommodation prices.
The Political Battle Over Devolution
The holiday tax controversy also raises questions about the government’s wider devolution strategy.
Burnham argues that giving local leaders greater financial powers will allow regions to make decisions based on their own economic priorities.
Supporters believe mayors understand their local economies better than ministers in Westminster and should therefore have greater control over funding.
However, opponents argue that giving local authorities additional taxation powers without a national cap could create an inconsistent system across England.
Holidaymakers might face different charges depending on where they choose to stay.
This could make planning domestic holidays more complicated and potentially encourage visitors to choose destinations where no levy applies.
There are also concerns about how the money will be spent.
UKHospitality has argued that the legislation should provide stronger guarantees that revenue raised from tourism will be reinvested in the visitor economy rather than being used to cover unrelated local government spending.
Without clear safeguards, businesses fear they could face higher costs without receiving any meaningful improvements in return.
What Happens Next?
The Visitor Levy Bill represents a significant change in the way local authorities can raise money from tourism.
The legislation is intended to establish the framework for local leaders to introduce charges from 2028.
Before introducing a levy, authorities will need to publish proposals and consult local residents and businesses.
The government has also indicated that local leaders will be expected to explain how the money raised will be used.
However, the absence of a binding national cap remains one of the industry’s biggest concerns.
Hospitality organisations are continuing to demand changes, arguing that the government should reconsider the proposals before they become a permanent additional cost for British holidaymakers.
Conclusion: Will Labour Make British Holidays Unaffordable?
Andy Burnham’s holiday tax plans have created another difficult political challenge for Labour.
The government insists that the visitor levy will provide valuable funding for local communities, improve tourist facilities and give regional leaders greater financial independence.
However, the warnings from Oxford Economics and UKHospitality cannot simply be ignored.
A potential £1.6 billion additional tax burden, combined with the risk of 33,000 job losses, raises serious questions about the economic consequences of the policy.
Britain’s tourism industry is an important source of employment and investment, particularly in coastal and rural communities where alternative opportunities can be limited.
The government must therefore ensure that its desire to raise additional local revenue does not undermine the very businesses that make these destinations attractive.
Families deserve affordable holidays, businesses need a competitive environment and local communities need sustainable investment.
Burnham now faces an important decision: continue with a controversial tax that has united much of the hospitality industry against him, or reconsider the proposals and introduce stronger protections for consumers and businesses.
Ultimately, a policy intended to support Britain’s tourist destinations should not leave families struggling to afford a holiday in their own country.