England's mayors set to gain tourist tax powers

England's mayors are about to gain a new power: the ability to charge tourists for staying overnight. The government plans to announce the details on Thursday, with Housing Secretary Angela Rayner meeting with local leaders to walk through how the system will work. The levy, formally called the Overnight Visitor Levy, would function as a percentage charge added to accommodation costs—a hotel room, a bed and breakfast, a short-term rental. How much that percentage is, and whether to impose it at all, will be left entirely to local decision-makers. There is no ceiling on the rate, though government officials believe mayors will exercise restraint.

The idea has been circulating since November, when Sir Keir Starmer's government first floated it. Starmer had intended to pass legislation before he stepped down as prime minister, but his successor, Andy Burnham, has kept the policy alive. Burnham knows the terrain firsthand: as mayor of Manchester, he oversaw the introduction of a £1-per-room, per-night charge in April 2023, designed to fund efforts to draw more visitors to the city. The current government frames this as part of a broader devolution agenda—shifting power and revenue-raising capacity from Westminster to the regions. Local leaders will have until March 2028 to outline their plans for how they would spend the money.

The structure of the tax—a percentage rather than a flat fee—is deliberate. Government officials argue it protects budget holidays from disproportionate burden. A family booking a modest guesthouse would pay less in absolute terms than guests at a luxury hotel, even if the percentage is identical. This design choice distinguishes the English proposal from schemes already operating elsewhere in the UK. In Scotland, Edinburgh introduced a 5% levy in July on overnight stays, capped at five nights per visitor. Glasgow is set to follow with its own 5% charge beginning in January 2027. Wales will implement a fixed £1.30 per person per night starting in April 2027. The model is not new to the world either: New York, Amsterdam, and Rome all charge overnight visitors to fund local services.

London's mayor, Sadiq Khan, has already signaled support. Analysis conducted by Central London Forward, a coalition of twelve central London authorities, estimated that a 3% levy could generate more than £350 million annually for the capital. That figure assumes the tax applies to all overnight accommodation—hotels, bed and breakfasts, short-term lets. Regional mayors broadly view the levy as essential. They argue it would unlock funding for local priorities and support economic growth in their areas, money that currently flows elsewhere or does not materialize at all.

But the hospitality industry is wary. UK Hospitality, the sector's main trade body, has warned that such a tax would make holidays more expensive at a moment when households are already stretched by cost-of-living pressures. The organization contends that additional charges risk damaging England's international competitiveness and could discourage domestic breaks, particularly among families and younger travelers who have fewer resources to absorb extra fees. The tension is real: local governments see untapped revenue and a tool for reinvestment; businesses see a barrier to bookings and a competitive disadvantage.

The government's position is that the decision belongs to local voters and their elected representatives. A government source stated plainly that "it will be up to local leaders and local voters" to determine "what is right for their area." This framing sidesteps the national debate and places responsibility—and political risk—squarely on mayors and councils. When Thursday's announcement comes, the framework will be clear. What remains to be seen is how many local leaders will actually use the power, at what rate, and whether the promised reinvestment materializes in ways that justify the cost to visitors.