A tourist tax in England – what’s the fuss all about?

Although they have existed since the 1950s, I first came across tourism levies, where a supplement is added to hotel bills to help fund local services, in the USA in the late 1980s when my receipt specified how much I had paid in sales tax and how much I had contributed to the city convention office. It has since become standard practice in many countries, and most UK holidaymakers are familiar with paying a little extra each night. So, why outrage now the Government has proposed it in England? 

Full disclosure – early in 2026 I chaired Chester’s unsuccessful attempt to introduce an ABID (Accommodation Business Improvement District), which is a different form of visitor levy.

The tourist tax

The Government announced in September 2026 that elected mayors will be given the power to impose a levy on overnight stays in commercial accommodation. This will be charged as a percentage of the cost (some have suggested a maximum of 5%). Mayors will decide how the money is spent, but the government has suggested it be used to improve high streets, public spaces, public transport and events to boost tourism.

The case against

The idea has been welcomed by some mayors and major attractions, including the V&A Museum and National Museums Liverpool. In general, though, the industry is opposed.  Representative bodies UK Hospitality, The Federation of Small Businesses and the Tourism Alliance have all come out against it. Their concerns are about increased costs, management, and trust.

Visa and electronic travel authorisation fees, air passenger duty, and 20% non-reclaimable VAT mean overseas visitors already pay more tax in Britain than in most other countries. Opponents argue that the levy will lead to a reduction in staying visitors, make the country even more expensive and less competitive, and lead to job losses in hospitality businesses with low profit margins that have already suffered from recent increases in staff, utilities, and supply costs.

It is also not yet clear how the collection of the levy will be managed. The consultation proposal in late 2025 said that accommodation businesses would be responsible for calculating the rate, charging visitors, and paying the mayor’s office. This sounds complex and will add further to business costs. I know from setting up Chester’s ABID how much effort went into finding the best administrative process.

Trust is a big issue. The Government's plan places no limit on the levy percentage, meaning that although mayors may say at the outset that they will cap it at 5%, they could increase it over time. Unlike ABIDs, where the local hospitality sector decides how the money raised will be used, under the planned approach the decisions will be taken by the mayor, so there is no guarantee it will be spent in ways that bring direct tourism benefit. Case study research by Bangor University in 2024 for the Welsh Government, when it was developing its visitor levy proposals, found vast differences in how revenues are used.

The case for

Advocates of a local tourism tax argue that the sector has been starved of direct funding for decades as successive governments have failed to re-invest the revenue raised from visitors and local authorities have had to cut their spending due to pressures in other areas. They also argue that it is unreasonable to expect the cost of local tourism services and visitor impacts (such as cleaning Chester’s streets after race days) to be borne mainly by residents. Surely visitors should contribute too.

The overnight visitor levy is a tried and tested approach to increasing destination competitiveness (the Bangor study found it is already used in 26 European countries) that doesn’t involve local people or businesses paying more. What’s more it has already been introduced, in ABID form, in Manchester and Liverpool, and provided place benefit without customer opposition or reduced visits. Supporters argue that it is better that the levy be managed by mayors rather than central government as they can determine whether and how to implement it, according to local needs.

A way forward

There is agreement among tourism bodies that action is needed for Britain to improve as a visitor destination (it currently ranks 113th out of 119 countries for price competitiveness according to the World Economic Forum), and that this requires a clear national strategy and sustained investment. There is also grudging acceptance that despite the Government's drive for economic growth, a significantly greater share of central tax receipts is unlikely given competing claims from the NHS, social care, defence, education, and more. Shifting resources for delivering regional economic growth away from Westminster to local areas is also welcomed.

What, then, if local taxes formed part of a package of measures that formed a national tourism growth plan delivering the actions long recommended by the UK’s umbrella trade association, the Tourism Alliance? These include cutting VAT on tourist accommodation, attractions and events to 10% or less (in line with France, Spain and Germany), extending the business rates relief recently announced for retail and pubs across the whole of the visitor economy, reinstating tax-free shopping for international visitors and restoring funding for the overseas promotional agency Visit Britain (it suffered a 40% cut in 2025 alone) in recognition of the return on investment it provides.

If these policies were implemented alongside the tourism tax as part of the long-awaited national visitor economy strategy with actions on workforce and skills development, it would demonstrate devolution in action and be evidence of a new coherence in Government tourism thinking. Issues over how the tourism tax will be administered would remain, and local debates over its level and allocation would still take place. However, another outcome would be that despite it, businesses would see their overall tax burden reduce, and local areas would have more funds to invest in place improvements that would please visitors and residents alike and contribute to sustained economic growth. An idealistic proposal? Perhaps, but then tourism professionals should always see the bright side.

About the author

Colin Potts is a Senior Lecturer at the University of Chester Business School, specialising in tourism destination planning and marketing. He also leads the working group of Chester’s One City Plan that sets out the visitor priorities for the city to 2045, is Vice Chair of Destination Chester, and a member of the Marketing Cheshire Advisory Board. Previously he headed the tourism services at Chester City Council and Gloucestershire County Council and was President of the national organisation for destination managers, the Tourism Management Institute. He is currently a member of the steering group developing Chester’s first place brand and is Vice Chair of Chester Mystery Plays.