New discretionary powers for mayors and local leaders to introduce visitor levies have created sector controversy. Has the charge worked in pilot locations or has the ‘tourist tax’ outstayed its welcome?
While legal challenges postpone wider government devolution plans, the proposal for local strategic authorities to have the power to introduce local accommodation levies has had a decidedly mixed reception.
At present there are few revenue levers to pull, and so the chance to add up to 5% onto hotel and other types of accommodation is tempting. However, the UK hospitality sector is already one of the most heavily taxed in the developed world. Unless someone oddly orders a take-away salad (zero VAT), there is little escape from an across-the-board 20% tax on beds, food and beverages.
Elsewhere in Europe the environment is a little kinder to hoteliers and their kind, with basic short-stay taxation set at 7% and France, Italy and Spain 10%. Add rising employment levies, business rate concerns, plus multi-factoral cost price inflation constantly chipping away at margins and it’s no surprise that UK Hospitality research has shown six venues a day are likely to close due to current operating conditions.
According to the Great British Tourism Survey, UK domestic tourism accounted for more than 300 million overnight stays in 2025 (103 million trips), with business trips accounting for a further 16 million nights. In terms of international visitors the 2025 data is not yet available, but 2024 saw 293 million heads hitting the pillow. Cumulatively, this resulted in approximately £70 billion in revenue for the hospitality sector. It’s tempting to see why circa 5% of this pie would be very tempting for local leaders to feast upon.
Manchester was the first city to introduce the tax in April 2023 set at £1 per night, which has subsequently raised £10.5 million. Liverpool followed suit in April 2025 with a £2 charge (£2 million realised in first year). Edinburgh has become the first to weigh in with a weightier charge of 5% in July 2026. It’s too early to ascertain the impact of the change, and there have been reports of practical difficulties in incorporating the levy onto bills, and what to do with regard to deposits, cancellations and other complicating factors adding to the compliance burden.
Given this context, it is understandable there has been an industry backlash, Whitbread have described the move as ‘hugely damaging’, with the Federation of Small Businesses calling the tax a ‘kick in the teeth’. UKHospitality have stated that 33,000 jobs may be at risk. Allen Simpson, its chief executive said: “In a week when the government has talked about growth, cutting red tape, getting people back into work and supporting hospitality, it is set to announce yet another tax that will do the absolute opposite.
"Give Mayors one tax-raising power on one sector and they will pull that lever until it snaps. You just need to look at the long list of Mayors already lining up to do just that.”
There is obviously a financial trade-off between the upkeep and regeneration of locations, the businesses which inhabit them and those who wish to visit, but it would seem that balance is currently askew. Further fiscal reform and devolution could well be on the way (subject to previously mentioned legal challenges), and maybe there could be alternative measures to provide vital revenue for mayors and combined authorities and mayors, such as a larger proportion of business rate precept, as well as a localised element of income tax outlined in the Cabinet Office’s ‘Rewiring the State’.
Whatever the answer, the one certainty is change – and given the Prime Minister’s devolution agenda this would not be uniform across the country. However, let us hope that in a bid to reindustrialise the nation, the government does not seriously damage tourism and hospitality - one of its key existing industries.
