In September 2026 the UK government granted England’s 14 regional mayors the authority to levy a percentage charge on overnight stays in hotels, bed-and-breakfasts and holiday lets. The move, championed by the Labour deputy prime minister, Andy Burnham, would allow each mayor to set a ceiling of up to 5 percent on accommodation bills. The charge, described as an overnight visitor levy is intended to fund local transport upgrades and other infrastructure projects, but it arrives at a time when the hospitality sector is already grappling with a sharp rise in operating costs.
London’s mayor, Sir Sadiq Khan, confirmed that the capital would respect the five-percent limit, emphasizing that any revenue would be earmarked for public-transport improvements. Similar assurances have come from Labour leaders in Greater Manchester, Liverpool, the West Midlands and the North East, who framed the levy as a “reasonable ceiling” that balances regional needs with visitor affordability. The government plans to introduce the legislation in Parliament within the next year, with implementation expected between late 2027 and early 2028.
Industry response: a warning of a jobs “bloodbath”
Hospitality bodies reacted swiftly. UKHospitality’s chief executive, Allen Simpson, sent a letter to the labour metro mayors urging them to cut the standard 20 percent VAT on food, drink and accommodation to 10 percent. He argued that the proposed levy, combined with the existing VAT rate, would push a family’s hotel bill in Manchester to a total tax burden of roughly 27 percent, compared with just 14.5 percent for an equivalent stay in Berlin. The association warned that a five-percent levy could add about £99 to a week-long London hotel stay, potentially costing the sector £1.6 billion nationwide.
Leading industry figures echoed these concerns. Jon Hendry Pickup, chief executive of Butlin’s, described the levy as a “hit on the very working people this Government claims to represent,” while JD Wetherspoon founder Sir Tim Martin said the extra charge would inevitably be passed on to customers. Luxury hotel magnate Sir Rocco Forte called the policy “a disgrace” and suggested it contradicted Labour’s growth rhetoric. The sector has already shed more than 100,000 jobs since the party took power in 2024, a decline that insiders fear could accelerate if tourists are priced out of domestic holidays.
Political tug-of-war: tax versus tourism
Conservative and Reform UK leaders have mounted a vocal opposition. Shadow Housing Secretary David Simmonds warned that businesses would face a “double whammy” of the existing 20 percent VAT plus a new tax, while Reform leader Nigel Farage labelled the measure a “holiday tax” that his own mayors in Greater Lincolnshire and Hull and East Yorkshire would refuse to implement. Tees Valley mayor Ben Houchen also pledged never to activate the power in his area, arguing that “you can’t tax your way to growth.” Within Labour, some MPs, such as Emma Lewell of South Shields, described the proposal as “anti-growth” and expressed regret over its timing.
Amid the debate, the Treasury’s own impact study admitted worries about affordability, especially during school-holiday peaks when dynamic pricing could amplify the levy’s effect. The report, however, defended the percentage-based approach as fairer than a flat fee, arguing that it would scale with the price of accommodation. Transport Secretary Heidi Alexander emphasized that the levy is not a national tax but a tool for “foundational strategic authorities” to fund local services, citing London’s plan to reinvest proceeds into its transport network.
Push for a VAT cut: matching European standards
European neighbours typically apply a lower VAT rate to tourism-related services. France, Spain, Germany and Italy all operate at 10 percent or less, a stark contrast to the UK’s 20 percent rate. The hospitality lobby therefore pressed Labour mayors to champion a parallel reduction, arguing that without it UK holidaymakers would face higher The call for a VAT cut gained traction after the Butlin’s chief highlighted the disparity, noting that a Bootle family visiting Manchester could pay a 27 percent tax burden versus only 14.5 percent for a comparable stay in Berlin.
While the mayoral powers remain intact, the impending clash between a new visitor levy and a potential VAT reduction will shape the next round of negotiations between local leaders, the hospitality industry and the central government. The outcome could determine whether domestic tourism remains affordable for British families or becomes an added financial strain that drives visitors abroad.
