The UK government has granted regional mayors in England the authority to impose an uncapped "overnight visitor levy" on accommodation charges, a move set to take effect from 2028. This policy, championed by Prime Minister Andy Burnham as part of a broader decentralisation agenda, aims to empower local leaders to raise and reinvest funds to support tourism-related services and infrastructure.
The levy will apply as a percentage of accommodation costs for hotels, bed-and-breakfasts, holiday lets, campsites, and similar establishments, including Airbnbs. It is separate from food and drink charges but will be added on top of existing Value Added Tax (VAT) at the standard 20 percent rate. While most mayors have indicated they intend to set the tax at around 5 percent, there is no statutory cap, allowing some regions the potential to impose higher rates. Authorities in areas without directly elected metro mayors will acquire these powers following local government reorganisation.
Business groups and opposition politicians have voiced strong concerns that the tax will disproportionately affect families undertaking domestic holidays, especially during peak school holiday periods when accommodation prices are typically higher. Critics argue that the levy risks pushing staycation costs beyond the reach of many households, potentially encouraging travelers to choose overseas destinations instead, thereby harming the UK tourism industry.
The Federation of Small Businesses and UK Hospitality have warned of significant economic consequences, including potential job losses—estimates range up to 33,000—and a reduction in tourism spending by billions of pounds by 2030. Oxford Economics projects that the tax could lead to nearly 12 million fewer overnight stays and a decline in investment within the hospitality sector. Small business representatives flagged that imposing the levy as a percentage rather than a flat fee would disproportionately impact budget-conscious travelers and smaller accommodation providers.
Supporters of the measure, including some Labour mayors and the government’s Communities Secretary Angela Rayner, argue the tax will allow localities to capture value from tourism and reinvest it in public services, attractions, and infrastructure that benefit both residents and visitors. Rayner emphasized that decisions will be made locally by leaders familiar with their area's needs, enabling tailored approaches to support tourism economies.
The policy follows similar visitor levies already implemented in parts of the UK, including a £1-per-night tax introduced in Greater Manchester by Burnham during his mayoralty and a 5 percent tax applied in Edinburgh for stays up to five nights. However, Scotland’s experience has been mixed; several councils paused their levies amid concerns over adverse impacts on tourism and local businesses.
Opposition figures warn that this policy could exacerbate pressure on an industry already strained by rising business costs, including national insurance contributions, employment regulations, and the post-pandemic economic climate. Some Conservative regional mayors have publicly stated they will not implement the tax, citing the challenging economic environment facing their hospitality sectors.
The government acknowledges that the overnight visitor levy may increase costs for domestic travelers but counters that it is intended to balance affordability with the need to sustain local services. The consultation responses released by the Communities Department revealed considerable public opposition to the percentage-based model and the absence of a maximum rate; nevertheless, ministers chose to proceed with the current framework.
As the proposal moves forward, its economic and social effects will be closely monitored, particularly regarding its impact on families’ holiday choices and the resilience of the UK’s tourism and hospitality industries.