How the UK’s Tourist Tax Could Affect Hotel Bookings and Revenue

The UK government has signalled a major shift in its tourism policy. Under proposals due to be finalised in February 2026, mayors will have the power to add a small surcharge to hotel bills. This visitor levy in the UK, often called a tourist tax, would be charged per person per night and apply to hotels, bed and breakfasts, guest houses and holiday lets. The aim is to reinvest the money directly in local infrastructure, transportation, and visitor facilities. Although similar taxes are common in Europe, the plan has prompted both enthusiasm and criticism. 

Here we explore what it means for hotels and travellers.

What Is a Tourist Tax?

• A tourist tax (also known as a visitor levy) is a small fee added to accommodation bills for overnight stays. It may be a flat charge per person per night or a percentage of the room rate.
  
• Many European cities use visitor levies to fund local services; for example, Venice and Barcelona have used such taxes to invest in infrastructure and manage overtourism.
  
• The UK government’s plan would bring England in line with Scotland and Wales, where local authorities already have powers to introduce similar levies.

Why Introduce a Tourist Levy Now?

• The government argues that a modest charge on overnight stays could raise substantial revenue for local projects. England welcomes more than 130 million overnight visits each year, so even a £1–£2 fee could generate millions for transport upgrades, heritage preservation and cultural events.
  
• Ministers say the levy would ensure that visitors contribute to the upkeep of the destinations they enjoy.
  
• Mayors across England—including those in London, Manchester, Liverpool and the West of England—have welcomed the proposal, seeing it as a tool to fund growth and improve tourist experiences.

Read how Rachel Reeves’ tourist tax plancould change how UK cities manage overnight accommodation fees.

Concerns Raised by the Hospitality Sector

While the government stresses the levy will be modest, industry groups are nervous:

• Cost to consumers: The sector warns that if the tax were set at 5%, similar to Edinburgh’s planned levy, it would effectively raise the VAT rate on hotel stays to 27%. Their analysis suggests the levy could cost British holidaymakers up to £518 million in extra charges.
  
• Competitiveness: Critics argue that high taxes could make the UK less attractive compared with destinations where VAT rates on accommodation are lower. Hotel leaders warn that adding another cost would squeeze margins and deter investment.
  
• Staycation impact: The trade body points out that Brits took 89 million overnight trips and stayed 255 million nights in England in 2024. Additional costs could discourage domestic holidays and drive visitors to cheaper destinations.

Could a Visitor Levy Really Drive Guests Away?

• Evidence from European cities suggests that small, transparent levies rarely reduce visitor numbers. Research cited by the UK government shows that reasonable fees have minimal impact on tourism.
  
• Travellers often accept modest charges when they see clear benefits, such as improved public spaces and cultural events. The levy could help fund major events in cities like Liverpool and London.
  
• However, there is a tipping point. High charges may hurt price‑sensitive travellers. The hospitality industry’s concern is that, combined with existing VAT and business rates, the levy could push prices beyond what many guests can afford.

The Impact of Tourist Tax in UK

• Manchester’s City Visitor Charge: Since April 2023, hotels and serviced apartments in central Manchester have collected a £1 per night fee to fund a Business Improvement District. Within a year, this levy raised over £2.8 million to support tourism marketing and events.
  
• Liverpool’s Accommodation BID: Liverpool collects a small percentage of visitors’ accommodation bills to fund local improvements.
  
• Bournemouth, Christchurch and Poole (BCP) tourist levy: From July 2024, this coastal area introduced a £2 per room, per night charge to protect its local economy and fund events such as the Bournemouth Air Festival. The scheme is expected to raise over £12 million in five years.

These examples show that small levies can generate significant funds without deterring visitors, provided the rates remain modest.

How Should Hotels Prepare For Tourist Levy?

To adapt to a potential tourist levy, accommodation providers can:

• Monitor local proposals: Each mayor will decide if and when to introduce a levy. Stay informed about consultations and timelines.
  
• Plan pricing strategies: Consider whether to itemise the levy as a separate line on bills or bundle it into room rates. Transparent communication helps guests understand the charge
  
• Emphasise value: Highlight improvements funded by the levy, such as better transport links or enhanced attractions. Position your property as contributing to the community.
  
• Review cashflow: Small levies can accumulate. Work with your accountant to forecast how the tax will affect revenue and VAT liabilities.
  
• Advocate responsibly: Participate in consultations to ensure the levy is fair and supports hospitality businesses.
  

How We Help The Hospitality Sector Prepare For The Tourist Tax in UK

As Apex Accountants, we provide specialist support to hotels, B&Bs and hospitality businesses preparing for the tourist tax:

• Visitor levy impact assessments – projecting how different levy rates could affect occupancy and revenue.
  
• Pricing and tax strategy – advising whether to absorb, pass on or bundle the levy and how to manage VAT.
  
• Cashflow forecasting – helping you budget for levy payments and ensure compliance.
  
• Consultation guidance – assisting with submissions to local government consultations to ensure your voice is heard.
  
• Ongoing accounting support – delivering day‑to‑day bookkeeping, payroll and tax services tailored to hospitality.

Our team of experts specialises in helping the hospitality sector navigate new tax challenges. We can provide tailored advice on pricing strategies, tax planning, and compliance. Contact us today to ensure your business is prepared for the proposed tourist tax.

Conclusion

The proposed tourist tax represents a new chapter for England’s hotel industry. By giving mayors the power to raise revenue locally, the government hopes to invest in infrastructure and enhance the visitor experience. Yet the hospitality sector warns that high rates could deter guests and add to an already heavy tax burden.

For hotel operators, the key is preparation. Stay informed, engage in consultations, and plan your pricing strategy. A well-managed visitor levy, kept at a modest level, can generate funds for much-needed improvements without sending guests elsewhere. With careful planning and expert advice, England’s hotels can survive — and even thrive — under a tourist tax.

FAQs About The Tourist Tax in UK

When researching this topic, several common questions arise:

• Will every city impose a tourist tax? 

No. Mayors have discretion to introduce a levy if it suits their local economy. Some areas may choose not to implement it.

• How much will it cost? 

The government has not set a national rate. Examples elsewhere range from £1 per person per night in Manchester to 5% of the room rate planned in Edinburgh.

• Where will the money go? 

Funds must be reinvested locally in transport, infrastructure and the visitor economy.

• Will it make UK holidays unaffordable? 

Moderate fees are unlikely to deter visitors; however, hospitality leaders warn that high rates could raise overall costs and dampen demand.

• Do other UK cities already have a levy? 

Yes. Manchester, Liverpool and BCP collect small charges, and they have raised millions for local projects.