Labour mayors in England vow to cap tourist tax at 5%
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Labour’s regional mayors in England have pledged to cap a new fee on visitors’ overnight stays at 5% of the cost of accommodation, after hospitality bosses expressed concerns over potential job losses.
Local leaders are set to gain new powers to charge an uncapped levy, known as a "tourist tax", as a percentage of hotel, bed and breakfast, and other accommodation costs. However, the Labour mayors in 10 city regions have agreed to voluntarily limit the charge to 5%, adding they had considered concerns over costs.
Reform UK’s two regional mayors and the two Conservative ones are expected to oppose any levy, given criticism from their national parties of the policy.
In a letter to Chancellor John Healey and Local Government Secretary Angela Rayner, the Labour metro mayors stated that 5% represented a "reasonable ceiling" on the tax, allowing for "meaningful investment" in local areas while also "not excessive" or "varying significantly" between regions.
They added that any future levies in their areas would be "subject to local consultation".
The letter was signed by Labour mayors in London, Greater Manchester, Liverpool City Region, West Midlands, North East, West of England, West Yorkshire, South Yorkshire, East Midlands, and York and North Yorkshire.
The government had previously pledged to protect budget holidays by ensuring low-cost accommodation pays the lowest levy, with the extra cash potentially reinvested in high streets and local transport.
While Labour mayors support the new levy, others have expressed caution or indicated they will not implement it.
Local leaders, including heads of Foundation Strategic Authorities, will need to clarify by early 2028 how revenue raised should be reinvested. Exemptions, such as for campsites, are also permitted. However, mayors are not allowed to exempt whole localities from the tax to avoid visitor and business confusion.
The government intends to introduce a bill to Parliament "in due course" to implement the levy, applicable to both UK residents and international visitors.
Another cost for family holidays
UKHospitality, a leading industry body, has criticized the levy, stating it poses a "threat to jobs" and would add approximately £100 to £120 on average to the cost of a family holiday in England, with concerns mayors could exceed the 5% limit.
UKHospitality CEO Allen Simpson warned on BBC Radio 4’s Today programme that local governments, struggling with funding from austerity, might "pull that lever until it snaps", potentially leading to holiday parks operating less frequently during the shoulder seasons and reduced disposable income for holidaymakers.
Conservative shadow housing secretary David Simmonds echoed these concerns, stating: "VAT…" (the text was cut off in the original, but this is where he likely addressed potential VAT implications or other fiscal concerns).
