The government has announced proposals that could allow mayors in England to introduced taxes on overnight stays – but just what does it mean?
The hospitality sector is fuming about proposals for a “tourist tax” in England – but it could deliver a much-needed boost to councils’ threadbare finances.
Under the plans, mayors will be given the power to introduce an overnight visitor levy. Local leaders will be allowed to apply it in the form of a percentage on the cost of hotels, bed and breakfasts and other types of accommodation. Industry chiefs, who have been lobbying heavily against the move and claiming it will further dent demand, have slammed the move.
Jon Hendry-Pickup, boss of Butlin’s, warned it would “no doubt” impact the investment plans for its sites. “It is a tax on UK holidaymakers,” he told the Mirror, predicting it would harm local communities in which tourism is the main source of income.
“There has been no reflection of all the things we have told government throughout this process,” he added. “The mayors can do whatever they want. “This is a tricky situation for us because we have different mayors across the country so they can have different levies. That means more red tape and the complexity will be huge.”
Another boss said: “The Prime Minister says he wants to help with the cost of living, before telling mayors to slap over £100 on the cost of your summer break. This isn’t going to impact rich foreign tourists in five star hotels. It’ll hurt hard-stretched British families and the thousands who lose their jobs as a result of the holiday tax.”
On the other hand, the money raised could help begin the tackle a black hole in councils’ finances. The Local Government Association has warned councils in England are facing a £7billion funding gap within three years – more than what councils spend on roads, transport, homelessness and housing services combined.
Cllr Mick Barton, chair of the LGA’s Culture, Tourism and Sport Committee, said: “Local communities know best, and we are pleased that the Government has said it should be up to them to decide whether to implement this levy.
“While we recognise the strong concerns expressed about an overnight visitor levy by the hospitality sector, when designed locally, in consultation with residents and business, it could enable significant investment in the wider visitor economy. That’s why it’s vital that councils retain a portion of the funding raised to support the services they provide which serve the visitor population. “
How will the tax work?
That hasn’t been fully announced but would be calculated as a percentage of the cost of the overnight stay.
What we do know is that it would be on the overall accommodation cost, so not per person, but there would be no cap on the number of nights.
Mayors would be asked to submit their plans to the government with what they want to invest the money in. But, perhaps most controversially for some, there is no limit to the percentage mayors can charge.
Any that do happen won’t be for some time as the Government needs to pass the Overnight Visitor Levy Bill, which was in the King’s Speech earlier this year. It may end up being no sooner than early 2028.
It’s worth remembering that although mayors in England will have the power to introduce a tax, it’s not mandatory. A couple of mayors have already said they won’t.
Where else have tourist taxes?
Edinburgh brought in a 5% tax on overnight accommodation this summer. It applies to everything from hotels and B&Bs, to self-catering apartments and hostels. It is capped at the first five nights. Hospitality bosses in the Scottish capital claim it has already dented trade, but it maybe too early to really know.
Elsewhere, the Welsh Parliament voted to allow parts of the country to introduce a levy of up to £1.30 per person per night. Officials said the money could raise as much as £33million a year to support and improve tourist destinations. A number of councils have shown interest in the scheme, with Cardiff proposing a levy from next April, at £1.30 per person per night on most types of accommodation. However, others areas such as the Vale of Glamorgan, Newport and Wrexham, have ruled it out.
Two English cities have introduced overnight levies, but crucially they are voluntary for businesses. Andy Burnham, when mayor of Manchester, brought in the City Visitor Charge in April 2023, a £1 per room, per night fee. And more than £2million has been raised in the first year since Liverpool introduced a £2 overnight stay levy.
Tourist taxes are also common in other countries. For instance, local French authorities can charge a tax for each person staying there. It varies from place to place, and can be up to €2 (£1.70) per day per person. In Italy, it depends on the city. In Rome it is between €3 (£2.60) and €7 (£6) per person, per night.
How much will the levy to the cost of my holiday?
Hospitality chiefs claim it will add between £100 and £200 to the cost of a holiday, but in reality we don’t know and it depends what percentage mayors pick.
For instance, a theoretical 5% levy on a mid-week room at a Premier Inn in Newcastle early next week would add £3.70. per night. If there’s two person staying then that’s £1.85 each. At the other end of the scale, a stay in a twin room at London’s top end hotel The Savoy costing a cool £1,300 a night, it would add another £66.
Holiday park chain Haven estimates a 5% levy would add £152 to the cost of a two week holiday in one of its basic caravans at its North Yorkshire site next summer.
What could be the wider impact?
Bosses warn anything that adds cost to overnight stays will ultimately mean visitors have less to spend other things, from attractions to meals out.
Andrew Crook, President of the National Federation Of Fish Friers, said: “We don’t want to jeopardise the tourist trade in any way, and do anything that makes it more expensive.”
David Miller, who runs two fish and chip outlets in York, said its stall in the city’s famous Shambles Market is reliant on tourists. “The main business in York now is tourism and tourists because it is such a beautiful city,” he said. “If they start charging a tourist tax it will have a knock on impact to businesses like mine.”