Regional mayors across England are to be given the power to impose a tourist tax on overnight accommodation as the Government presses ahead with plans for greater fiscal devolution.
The new Overnight Visitor Levy will allow mayors to charge visitors a percentage of the cost of overnight stays and reinvest the money in their local areas.
The Government first proposed the levy in 2025 and consulted on how the new power should operate. Ministers have now confirmed they are proceeding with the policy, with legislation providing the framework for mayors and potentially other strategic authorities to introduce a levy.
Mayors will decide whether to impose levy
The levy will not be a single national tourist tax automatically imposed across England. Instead, eligible local leaders will be given the option to introduce a charge in their own areas.
The Government's consultation proposed that the levy should be calculated as a percentage of accommodation costs, while allowing local leaders flexibility over the rate. The final legislative framework will determine the detailed rules.
Prime Minister Andy Burnham has said the levy is expected to be able to commence towards the end of the 2027-28 financial year.
Housing Secretary Angela Rayner said the measure would give mayors the choice to raise and reinvest funding where it was most needed, including in local services, public spaces and attractions used by residents and visitors.
Money could fund transport and local attractions
The Government argues that the levy will allow areas benefiting from large numbers of visitors to retain more of the economic value generated by tourism.
Revenue could be invested in transport, infrastructure, public spaces, cultural attractions and other measures intended to strengthen local visitor economies.
The policy forms part of Burnham's wider programme to transfer powers and financial control away from Westminster and towards England's regions.
In a statement to the House of Commons earlier this month, the Prime Minister described fiscal devolution as a central part of his plans to redistribute power, specifically identifying the overnight visitor levy as one of the first new revenue-raising powers for mayors.
Hospitality industry warns of jobs impact
The announcement has drawn immediate criticism from the hospitality industry.
UKHospitality chief executive Allen Simpson warned against giving mayors a new tax-raising power focused on a single sector, arguing that the measure would increase costs for families and create additional bureaucracy for businesses.
The organisation cited research commissioned from Oxford Economics estimating that a fully implemented 5% levy by 2030 could result in around 33,000 fewer jobs and reduce economic output by £2.2 billion.
Those figures are industry-backed estimates rather than Government projections.
The sector has also argued that hospitality businesses in Britain already face a comparatively high tax burden, including the UK's 20% standard rate of VAT.
Government says tourist levies common internationally
Ministers argue that visitor levies are already common in major tourist destinations around the world and can provide additional funding without significantly reducing visitor numbers.
The Government has previously cited cities including New York, Paris and Milan as examples of destinations operating similar charges.
Scotland has separately legislated to allow local visitor levies, with Edinburgh introducing a 5% charge on eligible overnight accommodation stays.
For England, the final rate and operation of any levy will depend on decisions taken by local leaders within the framework established by Parliament.