English regional mayors to get tourist tax powers, Labour pledges 5% cap

What happened

English regional mayors are poised to gain the authority to impose a new charge on overnight visitors, a move that would see a levy applied to stays in hotels, bed and breakfasts, and other accommodation, including Airbnbs. The Local Government Secretary, Angela Rayner, announced the plan, which grants mayors significant new tax-raising powers, allowing them to set a “tourist tax” without an explicit cap on the amount.

However, Labour regional mayors from ten city regions have swiftly pledged to voluntarily cap any such charge at 5% of the accommodation cost. This commitment comes after strong warnings from hospitality industry leaders about the potential risks to jobs and the wider economy.

Who is involved

Labour mayors from London, Greater Manchester, Liverpool City Region, West Midlands, North East, West of England, West Yorkshire, South Yorkshire, East Midlands, and York and North Yorkshire signed a joint letter outlining their 5% cap. They stated this would provide a “reasonable ceiling” that balances local investment with avoiding excessive or widely varying charges across regions. Any levies would also be subject to local consultation, they added.

The hospitality sector has voiced outrage, with UKHospitality, the industry’s trade body, leading the opposition. Its chief executive, Allen Simpson, warned that an uncapped levy would lead local leaders to “pull that lever until it snaps.” He estimated a 5% overnight charge across England could result in 33,000 job losses and cost the economy £2 billion, adding an average of £100 to £120 to a family holiday.

Concerns were echoed by hotel owners, including Premier Inn, Britain's largest hotel chain, which called the plan “hugely damaging.” Eddie Nelder, co-owner of Choice Hotels with properties in Blackpool and the Lake District, described it as “another hammer blow” for an industry already struggling. John Chappell, who operates five caravan parks in Skegness, Lincolnshire, warned an extra cost would “kill the industry off” for visitors on tight budgets.

Politically, the levy faces a divided response. While Labour mayors support the principle for local investment, Reform UK leader Nigel Farage confirmed his party's two mayors in Greater Lincolnshire and Hull and East Yorkshire “won't touch” the charge. Similarly, Conservative shadow housing secretary David Simmonds criticised the proposal, pointing out that hotels already pay 20% VAT, and this new tax would be subject to VAT as well.

What happens next

The government intends to introduce a bill in Parliament “in due course” to formalise these new powers. Under the proposals, mayors will need to clarify by early 2028 how they plan to reinvest the revenue generated from the tax. The government has also indicated it will cap the number of nights the tax can apply to, to avoid impacting long-term rental properties, though the specific cap is not yet clear.

The new powers will allow mayors to offer exemptions for certain sites, such as festival campsites, but they will not be permitted to exempt entire localities within their regions to ensure consistency for visitors and businesses. The government has pledged to protect budget holidays by ensuring low-cost accommodation pays the lowest levy.

Key context

Tourist taxes are common in many international destinations, including New York, Amsterdam, Rome, Paris, and Berlin, where they fund local services and infrastructure. Within the UK, Scotland already allows local authorities to implement a visitor levy; Edinburgh introduced a 5% rate in July, capped at five nights. In Wales, a capped levy of £1.30 per person per night is set for introduction in April 2027, with local authorities deciding its rollout.

Even before these new powers, some English cities had voluntary schemes. Manchester, under Mayor Andy Burnham, introduced a £1 per room, per night City Visitor Charge, while Liverpool has a £2 nightly charge. These are business-led initiatives where hotels pool funds to support local tourism.