England’s 14 regional mayors were granted the authority in September 2026 to impose a percentage charge on overnight stays in hotels, bed-and-breakfasts and holiday lets, a move that prompted immediate backlash from the hospitality sector and a heated political debate in London and across the regions.
The measure mattered because the levy, described as an overnight visitor levy was presented as a tool to fund local transport upgrades and infrastructure, but it arrived while the industry was already facing rising costs and recent tax changes that had shifted profitability dynamics for holiday lets and hotels.
Who acted and what powers were created
The Government granted the new powers to all 14 metro mayors in England, allowing each mayor to set a ceiling of up to 5 percent on accommodation bills. The legislation was championed within Labour by Deputy Prime Minister Andy Burnham and was confirmed in September 2026 as a route for revenue that local authorities could earmark for transport and infrastructure projects.
Sir Sadiq Khan London’s mayor, confirmed that the capital would respect the five-percent limit and said proceeds would be directed to public-transport improvements. Labour leaders in Greater Manchester, Liverpool, the West Midlands and the North East offered similar assurances, framing the levy as a “reasonable ceiling” balancing regional needs with visitor affordability.
Industry response and financial impact
Hospitality bodies warned of significant consequences for jobs and prices. UKHospitality’s chief executive Allen Simpson urged mayors to press for a cut in the standard 20 percent VAT on food, drink and accommodation to 10 percent arguing the combined effect of VAT and a visitor levy would raise the tax burden on a family hotel bill in Manchester to roughly 27 percent compared with just 14.5 percent for an equivalent stay in Berlin.
The association calculated that a five-percent levy could add about £99 to a week-long London hotel stay and potentially cost the sector £1.6 billion nationwide. Industry executives voiced stark warnings: Jon Hendry Pickup of Butlin called the levy “a hit on the very working people this Government claims to represent,” Sir Tim Martin of Wetherspoon said the charge would be passed to customers, and Sir Rocco Forte described the policy as “a disgrace” that contradicted growth rhetoric. The sector had already shed more than 100,000 jobs since 2024, a decline industry insiders fear could accelerate if domestic tourism demand softens.
Political reactions and regional refusals
Political opposition emerged across parties. David Simmonds the Conservative Shadow Housing Secretary, warned businesses would face a “double whammy” of the existing 20 percent VAT plus a new tax. Nigel Farage leader of Reform labelled the measure a “holiday tax” and said mayors from his party in Greater Lincolnshire and Hull and East Yorkshire would refuse implementation.
Tees Valley mayor Ben Houchen pledged never to activate the power in his area, saying “you can’t tax your way to growth.” Within Labour, some MPs, including Emma Lewell of South Shields, described the proposal as “anti-growth” and expressed regret over its timing. The Treasury’s impact study flagged concerns about affordability during school-holiday peaks when dynamic pricing could amplify the levy’s effect, while defending the percentage-based approach as fairer than a flat fee.
Holiday-let market context and strategic adaptation
Separately, the holiday-let market showed resilience after the government scrapped the Furnished Holiday Let tax relief earlier in 2026. The Holiday Let Index surveyed owners and brokers and found 48 percent reported rising earnings and a further 19 percent reported stable profits, with 86 percent achieving gross rental yields of 5 percent or higher. Owners had adjusted by increasing nightly rates and focusing on occupancy to offset tax changes, and 61 percent expressed confidence in future yields while 30 percent planned to buy another holiday let within twelve months.
Market participants warned, however, that the new mayoral levy added complexity for holiday lets. Owners and industry groups cautioned that a patchwork of local levies could create fragmentation, weaken competitiveness with European markets such as FranceSpainGermany and Italy where VAT on tourism services is typically lower, and prompt investors to reassess returns. Some operators highlighted that guest behaviour was changing with more last-minute bookings and shorter stays, increasing the sensitivity of pricing strategies to any additional charges.
Transport Secretary Heidi Alexander stressed the levy was not a national tax but a tool for “foundational strategic authorities” to fund local services, and called for transparent reinvestment of proceeds. The Government planned to introduce the legislation in Parliament within the next year with implementation expected between late 2027 and early 2028 subject to parliamentary scrutiny and regional decisions.
Last updated: 18 September 2026
