
Chancellor Rachel Reeves is preparing to hand new tax powers to English mayors — allowing them to apply a levy on overnight stays for the first time. This proposed Rachel Reeves tourist tax could be introduced in major cities such as London, Manchester, and Liverpool, with revenues used to support transport, public services, and local infrastructure.
The UK aims to modernise its visitor economy by following cities like Paris, New York, and Barcelona.
Each of these cities already applies an overnight levy to support local tourism services and infrastructure. The London tourist tax update reflects the UK’s push to devolve fiscal powers to local city authorities. This change will help local governments respond more effectively to tourism-related costs and pressures.
At Apex Accountants, we help hotels, B&Bs, Airbnb hosts, and short-let operators prepare for tax reforms like this—with clear guidance on systems, tax treatment, and financial planning.
The proposed levy will apply to overnight stays in participating English cities. It includes hotels, guest houses, holiday lets, and short-term rentals booked through platforms like Airbnb.
Local leaders can decide how the charge is applied — either as a flat fee (around £2 per night) or a percentage-based model, similar to the approach used in some EU cities. That means luxury hotels may carry higher per-night levies than economy or budget stays.
The charge will appear on invoices and booking confirmations, clearly itemised for guests. This may affect all overnight visitors, including tourists, business travellers, and families visiting relatives. Although participation is voluntary, we anticipate a swift response in cities such as London and Manchester. According to a recent London tourist tax update, the Greater London Authority estimates the capital alone could raise up to £240 million per year if a 5% levy is introduced.
Until now, England was the only G7 country that did not allow city authorities to apply tourist levies. Cities like Paris, Milan, New York, and Edinburgh already raise millions each year through similar schemes.
By enabling these powers, the government hopes to reduce the burden on local council budgets and improve infrastructure in heavily visited areas. The proposed tourist tax consultation in the UK, open until February 2026, seeks to clarify how cities can apply the levy and how funds will be distributed between mayors and borough councils.
While hospitality groups have raised concerns—arguing the tax may discourage short breaks or family trips—research from Centre for Cities suggests the impact on tourism numbers is minimal when rates are modest.
The tourist tax consultation in the UK will remain open until early 2026. Once final rules are agreed, cities will be allowed to launch their schemes. The first local levies could begin in late 2026 or early 2027.
Cities will be able to choose between flat or percentage models and may also apply caps on high-value bookings or long stays. Accommodation providers must report this tax separately in their financial records, and guests cannot recover it like VAT.
Hotels, B&Bs, serviced apartments, and short-let hosts will need to update their systems to:
• Add the tourist levy to booking engines and billing systems.
• Record the charge separately from accommodation income for accounting and tax purposes.
• Report and possibly remit the funds to local authorities.
• Inform guests clearly at the point of booking or check‑in.
The requirement applies to both direct bookings and third-party platforms like Airbnb, Booking.com, and Expedia. For larger chains and multiproperty operators, it may also require changes to centralised finance systems.
If your accommodation business uses cloud accounting tools, you’ll need to confirm whether your platform supports tourist levies and adjust tax codes accordingly. Failure to show the charge properly could create audit risks or misreporting under HMRC rules.
The short answer is no — not if it’s implemented well.
The Centre for Cities reports that visitor numbers tend to stay stable, even when modest levies are introduced. In fact, many visitors are familiar with these charges when travelling abroad.
What matters most is how the revenue is spent. Cities that reinvest in clean streets, safer areas, and public transport often benefit from a stronger tourist economy — not a weaker one.
Still, communication will be key. Businesses must explain the charge clearly, avoid surprise costs, and adapt marketing strategies to reassure customers that they are getting value for money.
At Apex Accountants, we work closely with tourism, hospitality, and accommodation clients across the UK. Our team helps businesses stay compliant and profitable through fiscal changes like this.
Here’s how we support you:
We’re already helping clients in London, Edinburgh, Cardiff and Manchester prepare for the proposed levy. Let us help you stay ahead.
Need help preparing your business for the tourist tax?
Get in touch with Apex Accountants for tailored tax advice, clear financial guidance, and full support to get your systems ready.
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