Tourist Levy Is A Disastrous Tax On Hotels

New powers to levy a tourist tax on visitors to fund local projects under a new policy have been branded “disastrous” by sector leaders and operators.

Chancellor Rachel Reeves will give mayors the ability to impose a “modest” charge on visitors staying in hotels, bed and breakfasts, guest houses and holiday lets through the English Devolution and Community Empowerment Bill, which is currently going through Parliament.

Brits took over 89 million overnight trips in England in 2024 and stayed for a total of 255 million nights, according to Visit Britain.

Analysis from UKHospitality shows that the tax could hit Brits with up to £518 million in additional tax, making holidays in England more expensive, with costs passed directly onto consumers and fuelling inflation.

If set at the level of the Edinburgh visitor levy, it would create an effective 27% VAT rate for consumers on their holidays, making it one of the highest in Europe. It would see consumers visiting destinations in England charged double the tax of visiting Paris and 70% more than in Barcelona and Rome.

It’s a significant U-turn by the Government, just two months after its Tourism Minister told the House of Commons it “had no plans to introduce a tourism tax”.

Kate Nicholls, Chair of UKHospitality, said:
“The Government has gone back on its word and introduced a damaging holiday tax. This is the wrong way to make policy and the fastest way to undermine investment.

“It has blatantly disregarded the commitments it gave to the House of Commons just two months ago that it ‘had no plans’ to introduce this tax.

“This is a shocking U-turn that will only make life more expensive for working people. It could cost the public up to £518 million in additional tax when they travel in the UK and having knock-on impacts for the wider hospitality sector.

“It will effectively increase the rate of VAT to 27% for people who want to enjoy a holiday in the UK – making it one of the highest tax rates for consumers in Europe.

“Make no mistake – this cost will be passed directly onto consumers, drive inflation and undermine the Government’s aim to reduce the cost of living.

“It’s important that the Government has paused to consult. We will be working hard with the Chancellor’s team to highlight the damage this will do to the cost of living.

Paul Callingham, Chairman of Starboard Hotels Ltd said: “There was nothing that would seriously adversely affect hospitality during the Chancellor, Rachel Reeves, Autumn Budget speech, but the announcement that the Government will allow local Mayors to impose their own new Tourist Levy’s without any control on how the money is to be spent is disastrous.”

He added: “This is a direct tax on hotels. We will need to include the Levy’s in our published room rates to comply with the Digital Markets, Competition and Consumers Act 2024. And guests will not pay extra as our rates are market driven, but this will be an increased burden on hoteliers at a time when the industry is already under pressure.”

Paul said: “This has not been thought through and we will probably see different rates all over the country which for a business like ours will be hard to manage.”

He added: “I suspect it will be impossible for the local authorities to collect this Levy from Holiday Let businesses, especially individual Air B&B landlords.”