The Government is considering giving mayors the power to introduce a holiday tax in England, despite assurances to Parliament two months ago that no such measure was planned, according to the Times.
The proposal, expected to be examined ahead of the 26 November Budget, would allow local leaders to apply a tourist levy on accommodation.
A holiday tax would be charged on top of existing accommodation costs in a similar way to VAT. UKHospitality stated that a 5% levy, combined with VAT and VAT applied to the tax itself, would create an effective rate of about 27% for consumers.
England currently applies a 20% VAT rate to hospitality, higher than the rates in many European destinations that operate tourist levies. A 5% levy on those stays would cost consumers about £518m.
According to UKHospitality, the move would amount to a significant reversal after former tourism minister Sir Chris Bryant and former exchequer secretary James Murray both stated that ministers had no intention of introducing a tourism tax.
VisitBritain figures show that domestic travellers took more than 89 million overnight trips in England in 2024, staying a total of 255 million nights.
UKHospitality said ministers should “stick to [their] word” by ruling out a levy at the Budget.
Kate Nicholls, UKHospitality chair, said: “If this is true, it would be another shocking U-turn from a government who committed in the House of Commons only two months ago that it would not introduce a tourism tax, and in fact promised the industry the same thing in writing.
“I know the government is worried about the cost of living, but this holiday tax is little more than a higher VAT rate for holidaymakers. Brits take over 89 million overnight trips in England, and stay for a total of 255 million nights. This is a bill we will all have to pay, and will only serve to ramp up prices and drive inflation.”
She added: “It would effectively hike our VAT rate to 27% at a time when Ireland has cut VAT on hospitality to 9% and Germany already has a VAT level of 7%. We need to get consumers spending. But this, on top of the huge damage from last year’s Budget, would only mean people cut back more – and more jobs are lost. Hospitality cannot foot the bill for the rest of the economy yet again.”
