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The mayor of London has expressed cautious support for proposals to introduce a tourist tax on visitors who stay overnight in the city. This potential levy could be authorized through the forthcoming English Devolution and Community Empowerment Bill, currently under consideration in Parliament, with Chancellor Rachel Reeves expected to grant local leaders, including Sir Sadiq Khan, the power to implement such a charge. Sir Sadiq has long advocated for devolving these taxation powers, with analysts estimating that a tourist tax could generate up to £240 million annually. In 2024, London recorded approximately 89 million overnight stays.
Currently, England remains the only G7 nation where national legislation restricts local authorities or mayors from imposing tourist taxes. Contrastingly, Scotland and Wales have recently enacted their own versions of levies on overnight visitors. Scottish local authorities can set a percentage-based charge dependent on accommodation costs, while Welsh councils will impose a flat fee of £1.30 per night from 2026 onwards. These developments highlight a shifting landscape where devolved regions have greater control over local tourism taxation.
Recent research commissioned by the Greater London Authority (GLA) from the Centre for Cities thinktank provides insight into how a tourist levy might operate in London. The study identified three common models within G7 cities like Paris, Munich, Milan, Toronto, New York, and Tokyo: percentage-based charges, flat fees, or variable rates linked to accommodation type and quality. For example, New York and Toronto apply percentage levies, with New York generating £493 million annually, while Tokyo employs a flat fee yielding only £35 million despite having the highest number of overnight stays. Since the UK lacks a statutory hotel rating system, the study suggests London is more likely to adopt either a flat fee or percentage model. Previous GLA estimates indicated that a £1 daily fee could raise £91 million, and a 5% charge might bring in as much as £240 million. Importantly, the thinktank concluded that introducing a levy at a level comparable to other major cities would not substantially deter visitors, as demand is less elastic in highly popular destinations.
The potential benefits of such a tax have been emphasized by the Centre for Cities, which argues that it could stimulate economic growth and enhance infrastructure and the business environment. Having direct control over both the rate and allocation of revenues would allow London’s mayor to adapt swiftly to changes in tourism patterns, as exemplified by Toronto’s recent rate increase ahead of the upcoming World Cup. Andrew Carter, Centre for Cities’ chief executive, praised Scotland’s approach where levies tied to overnight stays offer “flexible” and adjustable funding. He noted: “A tourist levy would benefit the capital’s tourist economy, provided the revenues go to local government – ideally split between City Hall and the boroughs – and are not ring-fenced by central government for specific purposes.” Carter also suggested that introducing the levy could mark the beginning of broader devolution of tax and spending powers to London, enabling the city to better leverage its economic potential.
Not all stakeholders are supportive, however. Kate Nicholls, chair of UK Hospitality, described the idea as “shocking,” warning of adverse effects on British consumers and the wider hospitality industry. She highlighted that London’s visitors include not just tourists but also workers, conference attendees, and families, adding that the new tax would represent “a tax on hardworking British families having a short break in London.” Nicholls also pointed to the existing 20% VAT rate on hospitality services, arguing that further taxation risks pushing customers away and harming jobs, investment, and growth.
Within London’s boroughs, attitudes vary but some, like Westminster, strongly favor the proposal. Adam Hug, leader of Westminster Council, emphasized the imbalance created by a daytime population of over one million compared to a resident population around 200,000. “Something through an overnight stay levy that helps redress that balance would be enormously welcome,” he said, noting the pressure on local resources and the potential for new funding to support local economies. Other boroughs, including Southwark and Brent, have similarly expressed support.
The mayor’s office has not fully committed, opting to withhold comment on speculative reports. A spokesperson reiterated that Sir Sadiq Khan supports the idea of a modest tourist tax aligned with international cities, recognizing its potential to “boost our economy, deliver growth and help cement London’s reputation as a global tourism and business destination.”
Though Chancellor Reeves is expected to formalize the proposal in the near future, no official decision has yet been made. The Ministry of Housing, Communities and Local Government maintains an openness to discussions with local leaders and notes that certain areas can already introduce levies via the Accommodation Business Improvement District (ABID) model. Richmond Council, for instance, is exploring establishing an ABID, as the borough hosts notable attractions such as Hampton Court Palace and Kew Gardens. Should a citywide tourist tax be adopted, existing local schemes might be discontinued to consolidate the approach
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