English cities could introduce new 'holiday tax' on hotel and Airbnb stays
This hike could raise hundreds of millions of pounds for cities to invest in transport and public services, but would also act as another hammer blow to the fragile hospitality industry
Tourists staying overnight in UK hotels and Airbnb-style accommodation could be required to pay a nightly tax under new plans being drawn up by Rachel Reeves.
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Plans for a tourist tax are expected to be announced by the chancellor in her budget next week, giving mayors the power to raise levies by charging tourists on the cost of their overnight stay.
This hike could raise hundreds of millions of pounds for cities to invest in transport and public services, but would also act as another hammer blow to the fragile hospitality industry.
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The sector has already hammered by tax rises and extra employment costs in the last fiscal statement, and experts warn these plans will "only serve to ramp up prices and drive inflation".
UKHospitality, which represents thousands of restaurants, hotels and pubs, said a tourism tax of 5 per cent would mean an effective consumer tax of 27 per cent.
This level of holiday tax would also cost Britons £518m in additional costs, the trade body claimed.
Kate Nicholls, the chair of UKHospitality, said: “I know the government is worried about the cost of living, but this holiday tax is little more than a higher VAT rate for holidaymakers.
"Brits take more than 89 million overnight trips in England, and stay for a total of 255 million nights. This is a bill we will all have to pay, and will only serve to ramp up prices and drive inflation."
A government source told the Times that England was one of the only developed countries not to have a tourism tax.
The legislation, which is going through parliament, is also being introduced by the devolved Scottish and Welsh governments using amendments to the English devolution and community empowerment bill.
London mayor Sadiq Khan and the Greater Manchester mayor Andy Burnham asked culture secretary Lisa Nandy and Ms Reeves to introduce a visitor levy this summer.
In a letter written alongside a coalition of mayors, Mr Burnham argued that a £1 to £5 a night levy in Greater Manchester would raise between £8m and £40m a year.
He said this money would help fund infrastructure projects such as the regeneration of Old Trafford or airport development.
Edinburgh will introduce a tourist tax at 5 per cent next July, after councils were granted the power to implement their own levies by the Scottish Parliament.
Councils in Wales will also have the power to charge £1.30-per-person-per-night tax for most accommodation from April 2027.
A Treasury spokesperson said: “We do not comment on budget speculation. The budget later this month will build stronger foundations to secure Britain’s future and focus on the priorities of working people: cutting waiting lists, cutting the national debt and cutting the cost of living."