The Government’s latest King’s Speech included plans to allow local authorities in England to introduce overnight visitor levies, often referred to as tourist taxes.
The proposed charges would apply to hotels, B&Bs, holiday lets and other accommodation providers, with councils given powers to decide whether to introduce the levy locally. Wales and Scotland have already introduced legislation allowing visitor levies if local authorities choose to implement them.
Ministers say the tax could help fund tourism infrastructure and local services, while businesses say it could increase pressure on an industry facing rising wage costs, higher National Insurance contributions and inflation.
The events sector is also watching closely. Conferences, exhibitions, festivals and live events rely on overnight visitors, and industry leaders say higher accommodation costs could affect attendance, visitor spending and the competitiveness of UK destinations.
Marvin Rust, managing director and EMEA Tax Practice Leader at Alvarez & Marsal, commented: “A tourist tax could not come at a worse time for many hospitality businesses struggling to get by right now. This would add further pressure onto businesses currently grappling with the twin problems of rising costs from business rates and employment costs and taxes on employers, with demand weakening as a result of fragile consumer confidence.
“With the introduction of this levy, businesses will require reassurance that the system still works for them, and that revenues are genuinely reinvested into demand generation thus supporting the visitor economy. The UK already places a relatively heavy tax burden on tourism, particularly through VAT, so there’s a real risk of undermining competitiveness over time with incremental costs making the UK less attractive as a visitor location.”
Another concern is the possibility of different systems across England, with some regions introducing levies while others do not, potentially affecting visitor demand between destinations.
Hospitality and tourism groups are now calling for clarity on how the money raised would be used, whether funds would be ring fenced for tourism investment, and whether exemptions could apply for business travel and events.
