England Plans Tourist Tax on Overnight Stays, With No Cap on Rates

England Plans New Tourist Tax on Overnight Stays

Visitors staying overnight in England could face an additional charge on their accommodation under plans announced by the UK government.

The proposed Overnight Visitor Levy would give mayors and other local leaders the power to introduce a tourist tax on paid overnight stays.

The levy would apply to accommodation such as hotels, holiday rentals, guesthouses and bed-and-breakfast establishments. It would cover both international and domestic visitors, including people travelling for business rather than tourism.

The government says the new system is intended to give local areas an additional source of revenue that can be invested in tourism, infrastructure, public transport, high streets and other local priorities.

Tourist Tax Could Be Around 5%, But There Is No Legal Cap

The proposed levy is expected to be around 5% of accommodation costs.

However, the government has chosen a percentage-based model without imposing a statutory maximum rate. This means the 5% figure is an expected level rather than a legally enforced ceiling.

Local mayors and strategic authorities would ultimately decide whether to introduce a levy in their area and, following local consultation, determine the rate.

This creates the possibility that different parts of England could eventually have different visitor-levy rates.

How Would the Tourist Tax Work?

Unlike a flat fee charged per person per night, the proposed English system would calculate the levy as a percentage of the accommodation price.

The government says this approach is intended to make the charge proportionate to the cost of a stay.

For example, a percentage-based levy would result in a smaller charge on a budget hotel than on an expensive five-star property.

The government has said this model is intended to protect cheaper holidays from disproportionately high fixed charges.

Who Would Pay the Visitor Levy?

The proposed levy would apply broadly to people staying in paid overnight accommodation.

This would include:

• International tourists

• UK residents travelling within England

• Business travellers

• Hotel guests

• Visitors staying in holiday rentals

• Guests in bed-and-breakfast establishments

• People using other eligible paid accommodation

The tax would therefore not be limited to foreign tourists.

A domestic traveller visiting another English city for a holiday or business trip could also be liable if the local authority introduced the levy.

Hotels and Holiday Rentals Could Be Covered

The proposed system is designed to cover a wide range of overnight accommodation.

Hotels, Airbnb-style holiday lets, guesthouses and bed-and-breakfast establishments are among the types of accommodation expected to fall within the framework.

Local authorities may also have flexibility to introduce exemptions for certain forms of accommodation, such as campsites, depending on local circumstances.

This means the exact scope could differ between local areas once individual levy schemes are developed.

When Could England's Tourist Tax Begin?

The visitor levy is not expected to come into operation before 2028.

The government intends to introduce legislation providing the necessary powers to local authorities and strategic authorities.

Local leaders will then need to consult on their proposals before deciding whether to introduce a levy.

The government expects mayors and relevant strategic authorities to set out spending plans by early 2028.

This means travellers should not assume that every overnight stay in England will immediately become subject to a tourist tax.

Mayors Will Decide Whether to Introduce the Levy

The government is not imposing a single nationwide tourist tax.

Instead, the proposal gives local leaders the power to decide whether a visitor levy is appropriate for their area.

A mayor or strategic authority would need to consult on the proposal and consider its potential impact before implementing it.

The government has said this approach is intended to support local decision-making and give communities greater control over how tourism-related revenue is raised and spent.

Where Could the Money Go?

Revenue from the levy could be used for projects designed to improve the visitor economy and local infrastructure.

Potential areas include:

• Public transport

• High-street improvements

• Tourism infrastructure

• Events

• Local visitor attractions

• Public spaces

• Other local economic-growth initiatives

The government says the additional revenue could help areas manage the pressures and opportunities created by large numbers of visitors.

However, individual spending priorities will depend on decisions made by local authorities.

Why Is England Introducing a Tourist Tax?

The government says the levy is part of a broader devolution strategy aimed at shifting financial and decision-making powers from central government to local areas.

England receives tens of millions of visitors every year. Local authorities argue that tourism can create additional pressure on transport, public spaces and infrastructure while also generating economic activity.

The visitor levy would give local governments another potential source of funding to invest in these areas.

The government has also linked the measure to efforts to strengthen local economic growth and the visitor economy.

Tourism Industry Raises Concerns About the Levy

The proposed tax has also generated concerns within the hospitality industry.

Industry representatives have warned that allowing different local authorities to set different rates could make the system complicated for businesses and visitors.

Hospitality executives have also argued that the absence of a statutory cap could create uncertainty if individual authorities decide to set higher rates.

Another concern is that additional accommodation costs could affect visitor demand, particularly in areas competing with other destinations.

These are industry concerns rather than established outcomes, and the actual effect will depend on the rates and systems eventually adopted by individual authorities.

Hotel Prices Are Already Rising

The proposed levy comes at a time when accommodation costs in Britain are already relatively high.

The Times, as cited by the Economic Times, reported that the average UK hotel room price reached £198 in July, up 5% from a year earlier.

An additional percentage-based charge could therefore increase the final cost of accommodation for travellers.

The impact would depend on the levy rate and the price of the particular accommodation.

England Would Not Be the First UK Destination With a Visitor Levy

Tourist taxes are already being introduced elsewhere in the UK.

Edinburgh introduced a 5% visitor levy on paid overnight accommodation from July 24, 2026, with the charge applying to the first five nights of a stay.

The Scottish system demonstrates one possible model for a visitor levy, although England's proposed framework would operate under different legislation and give local authorities greater flexibility over the rate.

The English proposal therefore should not be assumed to replicate Edinburgh's rules.

England's Model Could Produce Different Rates Across Cities

One of the most significant features of the proposed English system is local flexibility.

If different mayors and strategic authorities adopt visitor levies independently, travellers could eventually encounter different charges depending on where they stay.

For example, one city could choose not to introduce a levy, while another could adopt a percentage-based charge.

A third area could potentially choose a different rate.

This could make it important for travellers to check local accommodation taxes when planning trips after the system comes into force.

Budget Travellers May Face Smaller Charges

The percentage-based structure means the absolute charge would generally rise with the cost of accommodation.

A budget hotel would therefore attract a smaller levy in pounds than an expensive luxury hotel if both were subject to the same percentage.

The government specifically says the percentage model is intended to avoid flat-rate charges disproportionately affecting cheaper holidays.

However, the final amount paid by a traveller would depend on the local rate and the accommodation cost.

What About Long-Term or Temporary Accommodation?

The government has indicated that some accommodation types would be excluded.

Temporary accommodation, shelters and refuges would not be subject to the levy because they are not considered visitor accommodation and provide essential support to vulnerable people.

Local leaders may also have flexibility to offer exemptions for other categories, including campsites.

The detailed rules will become clearer once the legislation and local schemes are developed.

Businesses Will Help Administer the Levy

Accommodation providers will have an important role in administering the system.

Under the government's plans, hotels and other accommodation businesses would be responsible for paying the levy to the relevant strategic authority or mayor.

The government says it intends to work with businesses and local leaders to make the collection system as simple as possible.

The practical administration of the tax will therefore be an important issue for hotels, holiday-let operators and other accommodation providers.

What Could the Tourist Tax Mean for Travellers?

For travellers, the main effect would be an increase in the total cost of eligible overnight accommodation.

The amount would depend on:

1. Whether the destination introduces a visitor levy

2. The rate chosen by the local authority

3. The price of the accommodation

4. The number of nights covered

5. Any exemptions or local rules

Because the government is not proposing a national rate cap, travellers may eventually need to check the applicable local rules when booking accommodation.

What Could It Mean for Hotels?

Hotels and other accommodation businesses could face additional administrative responsibilities.

They may need to calculate the levy, collect or account for the charge and transfer the relevant amount to the local authority.

At the same time, industry groups are concerned that higher accommodation costs could influence demand.

The eventual effect on hotels will depend heavily on how many local authorities introduce the levy and what rates they choose.

Key Facts About England's Proposed Tourist Tax

FeatureProposed ruleNameOvernight Visitor LevyCoveragePaid overnight accommodationExpected rateAround 5%Statutory maximumNo legal cap proposedRate-settingLocal mayors/strategic authoritiesVisitors coveredDomestic and international travellersBusiness travelExpected to be coveredAccommodationHotels, holiday lets, B&Bs and guesthouses, among othersStart dateNot expected before 2028PurposeTourism, infrastructure and local economic prioritiesLocal consultationRequired before introductionCollectionAccommodation providers pay authorities

What Happens Next?

The next major step is legislation to give local authorities the necessary powers.

Once the legal framework is established, individual mayors and strategic authorities will be able to consider whether to introduce a visitor levy.

They will then need to consult on the details, including the proposed rate and how the revenue would be spent.

The government expects local leaders to publish spending plans by early 2028.

Bottom Line

England is preparing to introduce a framework allowing local mayors and strategic authorities to impose a tourist tax on overnight stays.

The proposed Overnight Visitor Levy would be charged as a percentage of accommodation costs, with the rate expected to be around 5%. However, there would be no statutory national cap, meaning local authorities could have flexibility to set their own rates.

The levy would apply to domestic and international visitors staying in eligible paid accommodation, including hotels and holiday rentals. It is not expected to begin before 2028.

For travellers, the most important change will be the possibility of different visitor-levy rates in different parts of England. For local authorities, the measure could create a new source of funding for tourism, infrastructure and local economic priorities. For the hospitality sector, the key questions will be how widely the levy is adopted, what rates are chosen and whether additional accommodation costs affect visitor demand.