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Tourist tax, but not for tourism: England levy lacks safeguards used elsewhere

ended 12. September 2026

England's proposed Overnight Visitor Levy could allow local authorities to impose a percentage-based tax on overnight stays without a national cap or a requirement to reinvest the proceeds in tourism. That differs from safeguards elsewhere: France directs tourist-tax revenues towards tourism, while Scotland and Wales place clearer conditions on how levy income is used and reported.

The lack of a ring-fence comes as Tourism Economics, part of Oxford Economics, estimates a nationwide 5% levy could result in £1.8bn less tourism spending, reduce GDP by £2.24bn and cost around 33,000 jobs by 2030. The modelling, commissioned by UKHospitality, estimates the levy could raise £1.6bn but lead to £688m in lost existing tax revenues.

Accommodation businesses already face 20% VAT, higher employment costs and business rates. Should councils be able to raise a new tax from visitors without guaranteeing the money is reinvested in the visitor economy?

  • Should money raised through an Overnight Visitor Levy be legally ring-fenced for tourism, rather than available for wider council spending?
  • Oxford Economics estimates a 5% levy could reduce GDP by £2.24bn and cost 33,000 jobs. How credible is that risk?
  • Would accommodation businesses pass the levy on to guests, or absorb some of the cost through lower margins?
  • Given 20% VAT and rising employment and business costs, is this the right time to introduce another tax on UK tourism?

6 responses from the Newspage community

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Kate AllenVerified
Owner at Finest Stays
Councils should not be allowed to treat tourism as a cash cow. This was not a manifesto commitment, and ministers had previously said they had no plans for a tourism tax. Britain’s visitor economy is already carrying 20% VAT, higher employment costs, business rates and a growing regulatory burden.

For coastal holiday businesses like ours, this is incredibly frustrating. The market is already highly price-sensitive.

The risk is that this changes the shape of British holidays. Guests may shorten stays, move between destinations more quickly or spend less locally to offset higher accommodation costs. Fewer nights do not just hurt accommodation providers; they mean less spending in pubs, restaurants, shops and attractions too.

If tourism is being asked to raise this money, every pound should be ring-fenced for additional investment in the visitor economy, with businesses given a say in how it is spent.
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Tony RedondoVerified
Founder at Cosmos Currency Exchange
Like everything else this government has done, they talk growth then deliver tax rises and regulatory overload. Unlike France, Scotland and Wales, England's proposed Overnight Visitor Levy lets councils’ tax overnight stays with no national cap and no ring-fencing for tourism. Without that, hospitality operators fear it's just another extraction from customers rather than funding for regional marketing or infrastructure. The timing is dire, landing days after the NATS air traffic control failure grounded flights and cancelled nearly 1,100 services across the UK, yet another blow to Britain's reputation as a place worth visiting. Oxford Economics' estimate uses sound modelling but wrongly assumes uniform national rollout rather than patchy, discretionary local adoption. Since VAT applies to room charges, most operators will pass the levy to guests. Add a 20% VAT rate and rising employment costs, and critics are right: it risks hammering Britain's international competitiveness.
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Tony SanchezVerified
Founder at Bridging Loan Directory
From a holiday-let investment perspective, the concern is whether another cost changes an already finely balanced calculation.

Bridging Loan Directory’s reporting found investors already accounting for higher stamp duty, the abolition of the furnished holiday lettings tax regime, possible second-home council tax premiums and rising operating costs. An uncapped overnight levy adds another variable.

The £2.24bn GDP and 33,000 jobs figures are commissioned modelling, not a certain outcome. The actual effect depends on the rate, local demand, how much businesses pass to guests and how councils spend the proceeds.

Some operators may pass the cost on, while price-sensitive businesses may absorb part through lower margins or risk weaker occupancy.

If the levy is intended to support visitor destinations, councils should show how the money is reinvested in the visitor economy. Otherwise, accommodation businesses would collect a tourism tax without any guarantee that tourism benefits.
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Harvey DhillonVerified
Founder & CEO at Zmartly
Ring-fencing is worth insisting on, and as drafted England wouldn't deliver it. In Wales a principal council "must use the proceeds of the levy for the purposes of destination management and improvement in its area." England would empower mayoral and foundation strategic authorities to invest the money "in line with regional growth strategies", which "can include" the visitor economy. The provider would be the one liable, and the rules would leave it to them whether to pass some or all of it on. Where the room rate will not carry it, the cost comes out of margin. The document does not address whether VAT would be charged on top of the levy, and if it were, a levy at the modelled 5 per cent would cost the guest 6 per cent of the net room rate. The jobs and GDP forecast models an England-wide levy, not the opt-in proposed. Whether to legislate for it now is the government's call to defend, not mine. The VAT answer should land before the rate does.
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Scott GallacherVerified
Director at Rowley Turton
Given the challenges facing both UK businesses and household budgets, taxing staycations looks like a backward step.

Government research shows that, among people who didn't take a holiday in England, more than a third said they simply couldn't afford one. It also found that people living in the most deprived areas were significantly less likely to take an English holiday than those in the least deprived areas.

So this isn't simply a tax on wealthy tourists staying in expensive hotels. It potentially increases the cost of an ordinary family break at the seaside, a weekend away or visiting another part of the country.

At a time when families are already struggling with the cost of living and UK hospitality businesses are under pressure, making domestic holidays more expensive seems particularly difficult to justify.

Source: UK Government Participation Survey 2024/25:
https://www.gov.uk/government/statistics/participation-survey-2024-25-annual-publication
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Nouran MoustafaVerified
Practice Principal & IFA at Roxton Wealth
If councils are going to tax tourism, the money should be legally tied to tourism. Otherwise this risks becoming less of a visitor levy and more of a convenient new revenue stream.

The economic modelling should not be treated as gospel, but 33,000 potential job losses and a £2.24bn GDP hit are far too serious to dismiss. Tourism is incredibly price-sensitive. Add another percentage to a family holiday and some people will simply spend less, stay fewer nights or go elsewhere.

Most accommodation businesses will try to pass the levy on, because margins are already under pressure from VAT, wages, rates and energy costs. Those that cannot will absorb it through lower profit.

My concern is simple: we are taxing the visitor, loading the admin onto the business, and not even guaranteeing that the money comes back to support the industry that generated it.

If you tax tourism to fund everything except tourism, do not be surprised when there is less tourism left to tax.