The UK government may introduce a nightly tax for hotel and short-term rental stays, as anticipated in a budget announcement by Chancellor Rachel Reeves later this month. Reports suggest that mayors will be empowered to impose this tax, which could generate substantial revenue for local investment in transportation and public services.
The proposed tax is projected to raise hundreds of millions of pounds, though it has raised concerns within the hospitality sector, which has already been challenged by previous tax increases and rising costs. The trade group UKHospitality claims that a 5% tourism tax, similar to one set to be implemented in Edinburgh, would effectively result in a 27% financial burden on consumers when accounting for VAT, making it one of the highest tourist tax rates in Europe.
UKHospitality estimates that this could add approximately £518 million in extra costs for British travelers. Chair Kate Nicholls expressed concerns that this tax would equate to a higher VAT for holidaymakers, warning of the impact on a considerable number of overnight trips taken by Britons.
Government sources indicated that England is unique among developed countries for not having a tourism tax, highlighting that such levies have already been adopted by the Scottish and Welsh governments. The plans are expected to be introduced as amendments to current legislation being discussed in Parliament.
A coalition of mayors from various English cities, including London and Manchester, has also called for a visitor levy to support local infrastructure projects, estimating that a £1 to £5 per night charge could raise millions annually for developments like airport enhancements.
In related budget discussions, the Chancellor may also consider revising the sugar tax to include milk-based drinks, which could contribute additional revenue. Official comments on budget proposals remain speculative at this time.
Source: https://www.theguardian.com/business/2025/nov/17/rachel-reeves-holiday-tax-english-hotel-airbnb-stays