The England overnight visitor levy, set to be formally announced by the government on Thursday, would hand mayors and other strategic authority leaders an uncapped power to charge tourists a percentage of their accommodation bill, with no statutory ceiling written into the legislation as it stands.
Housing Secretary Angela Rayner is meeting regional mayors virtually at No 10 North to set out the framework, which originates from a King’s Speech 2026 commitment to devolve new revenue-raising powers to local leaders as part of the Labour manifesto agenda.
The levy would apply to hotels, bed and breakfasts and other overnight accommodation, structured as a percentage of the room rate rather than a flat fee. Ministers believe the percentage model protects budget travellers; the hospitality industry is considerably less convinced.
Industry Puts a Number on the England Overnight Visitor Levy’s Cost
UKHospitality, the leading trade body for the sector, has put stark figures on the potential damage. A 5% overnight levy across England could result in 33,000 job losses and a £2 billion hit to the sector, according to The Guardian.
Chief executive Allen Simpson told BBC Radio 4’s Today programme the plans would add ‘about £100 to £120 on average to the cost of a family holiday in England’. His concern is not the principle of the levy so much as the absence of a ceiling. ‘If you only devolve one tax raising power, of course local mayors are going to pull that lever until it snaps,’ he said.
UKHospitality is pressing mayors on two fronts. It wants a statutory cap of 5% written into the legislation, and it is asking mayors to back a reduction in VAT on hospitality from the current 20% to 10% as a condition for accepting the new charge. France, Spain, Germany and Italy all levy VAT on holidays at 10% or lower; the UK does not.
Conservative shadow housing secretary David Simmonds put the same arithmetic more bluntly: ‘VAT is already charged at 20% on hotels (much higher than in other countries) and now they’ll pay VAT on this tourism tax too: a Labour double whammy.’
How Scotland’s Experience Should Inform the Debate
England is not starting from scratch. The Edinburgh Visitor Levy took effect on 24 July 2026, charging 5% on overnight accommodation booked on or after 1 October 2025. The charge applies before VAT and excludes extras such as meals, parking and transport. Accommodation providers keep 2% of what they collect to offset administrative costs.
The City of Edinburgh Council forecasts the levy will raise £100 million by 2030, earmarked for public services, cultural programmes and city infrastructure, according to Forever Edinburgh. Edinburgh caps the charge at five nights per stay. Glasgow is preparing to go further: a 5% levy covering the full length of any stay is planned from 25 January 2027, with no nightly cap.
The English proposals drop the cap entirely. That is the crux of the argument. Edinburgh at 5% for five nights is a known quantity; an English mayor, facing a structural funding gap, choosing 8% or 10% for an unlimited stay is a different proposition altogether.
The Local Government Association’s briefing on the King’s Speech says revenues should be invested to stimulate growth in the visitor economy, covering attractions, large events, culture, heritage and transport. That sounds sensible in principle. The problem is that nothing in the current framework obliges a mayor to spend the money that way, and local authorities are under considerable fiscal strain.
Mayor of London Sir Sadiq Khan told the Standard on Thursday that action ‘needs to happen sooner rather than later.’ Paul Swaddle, leader of Westminster City Council, immediately raised the question of whether central London boroughs would see any of the receipts. Two voluntary schemes already exist: Manchester charges £1 per room per night, and Liverpool charges £2 nightly, both run by businesses rather than by mayoral decree. The proposed England overnight visitor levy would give mayors compulsory power they currently lack.
Local leaders must clarify by March 2028 how they intend to spend any new revenue. That is a broad runway, and the absence of a statutory spending ring-fence or a rate ceiling is where this policy either succeeds or unravels. If the first mayor to set a rate pitches it high, the political pressure on peers to do the same will be immediate. The government needs to decide before that moment arrives whether it wants a floor, a ceiling, or simply the bill it has written.
