Mayors to Get Powers to Charge Overnight Visitor Levy on Hotel Stays

Mayors and local leaders in England are to be given the power to charge visitors a levy on overnight stays, the government has confirmed, in a move ministers say will let areas that attract tourists keep more of the money they bring in.

The Overnight Visitor Levy will be available to mayors of mayoral combined authorities and to the leaders of Foundation Strategic Authorities. Local leaders will decide whether to introduce it after consulting residents and businesses.

How the levy will work

Rather than a flat nightly fee, the charge will be calculated as a percentage of the cost of accommodation. Ministers say this is designed to protect the affordability of budget holidays, as guests paying less for a room will pay less in levy.

Hotels and other accommodation providers will collect the money and pass it on to the relevant mayor or strategic authority. The government has said it will work with the industry to keep the administration as simple as possible. No national rate has been set.

Some types of accommodation will be exempt, including temporary accommodation, shelters and refuges. Local leaders will have discretion over whether campsites are included.

The government's consultation on the policy closed on 18 February. Legislation will be brought forward in due course, and authorities are expected to publish plans for how they would spend the proceeds in early 2028.

The case for the change

Housing, Communities and Local Government Secretary Angela Rayner said local leaders in popular destinations should have the power "to make the most of that popularity".

Figures cited by the government from VisitBritain show there were 42.6 million inbound visits to the UK in 2024, with visitors spending £32.5bn and staying a total of 293 million nights.

Steve Rotheram, the Mayor of the Liverpool City Region, has estimated that a levy could raise up to £18m a year for his area.

The policy forms part of Prime Minister Andy Burnham's wider push to hand more powers to regional leaders, which has included an offer of devolution deals to every region of England.

Hospitality industry warns of job losses

The hospitality sector reacted angrily. UKHospitality, which represents pubs, hotels and restaurants, said the absence of any cap amounted to unlimited tax-raising powers on family holidays.

The trade body estimates the levy could cost holidaymakers £1.6bn, reduce economic output by £2.2bn and put 33,000 jobs at risk. Its chief executive, Allen Simpson, warned that once mayors were handed a single tax-raising power on one sector, they would "pull that lever until it snaps".

Mr Simpson argued the policy was at odds with the government's stated aims of supporting growth, cutting red tape and getting more people into work. He said it would price working families out of British breaks and undermine job creation in every part of the country.

The organisation is instead urging the Chancellor to cut VAT on hospitality to 10%, in line with much of Europe, in the Budget, as well as to reform business rates and reduce National Insurance contributions.

What happens next

The levy cannot be introduced until Parliament passes the necessary legislation, and no date has yet been given for a bill. Once the law is in place, each mayor or authority leader would need to consult locally before deciding whether to use the power and at what rate.

The argument is likely to continue in the run-up to next month's Budget, with the hospitality industry pressing for tax relief elsewhere and ministers presenting the levy as a way for local areas to invest in their own growth.

Image: Rodhullandemu via Wikimedia Commons, CC BY-SA 4.0