Tourist tax in England set to be uncapped as mayors gain new powers

Companies that send employees on overnight trips could face higher hotel bills after ministers set out plans on 10 September 2026 for a tourist tax in England, handing mayors and other local leaders the power to levy a charge on accommodation.

Earlier discussions centred on a flat fee, but the charge is now expected to be a percentage of the cost of each stay, with no upper limit, so bills would climb with room rates. Hospitality businesses warn tens of thousands of jobs could be at risk.

Angela Rayner, the Housing, Communities and Local Government Secretary, is due to flesh out the proposals when she meets mayors at No10 North, the government’s Manchester base. Mayors would choose how the proceeds are spent.

Proposals for a tourist tax in England were first unveiled during Keir Starmer’s premiership, after the devolved governments in Scotland and Wales introduced their own schemes, and English mayors were promised overnight stay tax powers in May’s King’s Speech. Prime Minister Andy Burnham, who introduced Manchester’s City Visitor Charge of £1 per room per night in April 2023 as Mayor of Greater Manchester, appears to have pushed them further.

How much will the tourist tax cost?

It would be up to each mayor, with no national cap. A government source said mayors were unlikely to price the levy high enough to damage local tourism, with most signalling a rate of a few per cent.

“We have always been clear that while central government will set the framework for this power, it will be up to local leaders and local voters to decide what is right for their area,” the source said.

In London, estimates suggest a 3 per cent levy floated by the Mayor of London, Lord Khan, could raise £350 million a year, and he has welcomed proposals for a charge in the capital. Lord Houchen, the Conservative Mayor of Tees Valley, has dismissed the idea outright.

A House of Commons Library briefing notes that under the overnight visitor levy proposals the government consulted on last winter, VAT would be charged on the full cost of a stay, including the levy.

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Hospitality bosses warn over jobs

Tourism trade bodies want the levy applied consistently across regions. Allen Simpson, chief executive of UKHospitality, told BBC Radio 4’s Today programme that Edinburgh’s new tourism tax was “already having damaging effects”, and that UK holidays were “already more expensive” than they appear because of higher VAT.

“What we’re talking about here is an open-ended power for mayors to set tourism taxes at any level they want,” Mr Simpson said. “And remember that if you go to Paris, if you go to Rome, if you go to Berlin, you’re paying a small tourism tax, but it’s capped.”

Similar charges already fund local services across Europe, and our look at destinations that charge a tourist tax lists many of them. Mr Simpson also warned that jobs in communities reliant on tourism were now at risk.

Butlin’s chief executive Jon Hendry Pickup said the company had been worried even when a Holiday Tax of around 5 per cent or £2 per person per night was under discussion. Giving mayors the power to impose a levy “without a national upper limit takes those concerns to another level and risks making family holidays less affordable”, he said.

What the tourist tax in England means for business travel

A percentage-based tourist tax in England would bite hardest where spending is highest, such as long project placements, multi-day conferences and peak-season city trips.

The Business Travel Association, the Global Business Travel Association and the Institute of Travel Management have already called for business travel to be exempt from the levy. Until detailed rules are published, firms should assume work stays will be charged like holidays.

With each mayor free to set a different rate, or none, firms with staff working across several regions could face a patchwork of charges. Sensible steps now include checking that hotel caps in travel policies leave room for a levy, asking whether negotiated rates will include local charges and building possible costs into quotes for client work involving long stays.