Mayors to get uncapped tourist levy powers amid hospitality industry backlash

The UK government has announced that regional authorities will be given the power to impose a levy on overnight tourists, with no upper limit on the rate. The move, outlined in a recent policy paper, is intended to fund local growth strategies and support the visitor economy.

How the levy would work

Under the plan, the charge would be calculated as a percentage of accommodation costs rather than a flat fee, a formula the government says will protect budget travellers. The proposal mirrors a model already used in Scotland, but unlike the Scottish system it would have no cap.

Industry reaction

Hospitality groups have reacted sharply. UK Hospitality, the sector’s trade body, warned that an uncapped levy could raise the price of holidays at a time when households are already feeling the squeeze of the cost‑of‑living crisis.

“We are concerned by the prospect of an uncapped visitor levy at a time when the hospitality sector is already facing a significant tax burden.”

Greg Hegarty, co‑chief executive of PPHE Hotel Group, said the additional tax could make the UK a more expensive destination for both domestic and overseas visitors, potentially weakening demand and hurting employment.

Allen Simpson, chief executive of UK Hospitality, compared the proposal to the modest, capped taxes charged in cities such as Paris, Rome and Berlin, noting that “this one isn’t”.

Potential impact on jobs and revenue

Analysis commissioned by UK Hospitality and carried out by Oxford Economics modelled three levy scenarios. A 5 per cent charge on accommodation could, by 2030, cost up to 33,000 jobs and shave £1.8 billion from tourism spending, while also reducing Treasury receipts by £688 million.

The plan follows a pilot city levy introduced by Andy Burnham in Manchester in April 2023, which added a £1‑per‑room‑per‑night fee to fund visitor‑attraction projects. London mayor Sadiq Khan has previously voiced support for a similar measure, promising that any revenue would be used to improve the city’s environment for tourists.

Shadow chancellor Andrew Griffith warned that an unlimited tourist tax could limit job prospects for young people in the hospitality sector.

Housing secretary Angela Rayner is set to meet the nation’s mayors at Number 10 later today to discuss the rollout. The outcome will shape how local authorities balance the need for infrastructure funding against the risk of making the UK a pricier holiday spot.

For a broader view of how tax policy can affect youth employment, see the recent report on remote work and taxes.