UK Budget 2025: Overnight-Stay Levy Explained — How the New Tourist Tax Could Affect Travel and City Funding
The UK Government is granting mayors across England the power to introduce an overnight-stay levy, often called a tourist tax. Here’s what this means for accommodation prices, travellers, and city investments in 2026 and beyond.
UK Budget 2025: Overnight-Stay Levy Explained — How the New Tourist Tax Could Affect Travel and City Funding
In November 2025, the UK Government confirmed it will give mayors and regional authorities across England the power to introduce an overnight-stay levy, commonly referred to as a tourist tax. This marks a major shift in how cities can raise revenue to support infrastructure, transport, maintenance, and tourism services.
🔗 Reuters Report:
https://www.reuters.com/world/uk/uk-government-gives-new-powers-mayors-england-introduce-travel-levy-2025-11-25/
What Is the Overnight-Stay Levy?
According to the government announcement, local leaders will be allowed to apply a fee to paid overnight stays in accommodations such as:
- Hotels
- Guesthouses & B&Bs
- Holiday lets & serviced apartments
- Caravan and camping sites
- Short-term rental accommodation
🔗 Government Announcement (Official):
https://www.gov.uk/government/news/levy-on-overnight-trips-will-help-mayors-invest-in-local-growth
A city may choose either:
- A flat nightly fee, or
- A percentage-based levy of the room cost
This brings England in line with many other European destinations that already apply visitor levies.
Why Introduce a Tourist Tax Now?
City officials and government departments argue that the levy will:
- Support local transport and infrastructure
- Maintain public spaces heavily used by visitors
- Improve the overall visitor experience
- Provide mayors with new tools for regional growth and investment
The plan is part of England’s wider fiscal devolution strategy, giving cities more control over their revenue.
🔗 Analysis — Fiscal Devolution & Tourism Funding:
https://www.shoosmiths.com/perspectives/stories/articles/tourist-tax-a-new-era-of-fiscal-devolution-in-england
How Much Could It Cost Travellers?
No national rate is set, and each city will determine its own amount. Early estimates from industry reports suggest:
| Accommodation Type | Estimated Levy |
|---|---|
| Budget Hotels | £1–£2 per night |
| Mid-Range Hotels | £2–£4 per night |
| Premium Hotels | £4–£10 per night |
| Short-Term Rentals | Depending on local rules |
A Financial Times analysis shows that if London adopts a 5% room-rate levy, average visitors could pay £10–£12 extra per night.
🔗 FT Coverage:
https://www.ft.com/content/576496e1-8049-4c2b-98ba-9f2a1b3e8a14
Possible Benefits for Cities
Supporters of the levy highlight several potential advantages:
- An additional revenue stream for strained city budgets
- More investment into transport, cleanliness, maintenance, and cultural sites
- More sustainable tourism management
- Improved quality of life for local residents
London alone could raise hundreds of millions annually once implemented.
🔗 Local Revenue Estimate (Hackney Citizen):
https://www.hackneycitizen.co.uk/2025/11/27/levy-overnight-stays-240million-london/
Concerns From the Hospitality Sector
Hotels, B&Bs, Airbnbs, and industry groups have raised these concerns:
- Higher prices may reduce visitor numbers
- Increased administrative burden for small operators
- Competitive disadvantage compared to cities without such levies
- Short-term rentals may require new tax-collection processes
🔗 Tourism Industry Response:
https://www.travelandtourworld.com/news/article/londons-proposed-tourist-tax-will-a-new-visitor-levy-drive-travelers-away-in-2026/
Key Details Still Unclear
| Question | Status |
|---|---|
| What rate will each city choose? | To be decided locally |
| When will cities implement it? | After 2026, following local consultations |
| Will children/students be exempt? | Not yet defined |
| Will Airbnb & rental platforms collect it automatically? | Expected but not confirmed |
| Will the fee apply per person or per room? | Depends on the city |
🔗 Further Policy Insight:
https://www.euronews.com/travel/2025/11/26/tourist-tax-to-be-introduced-across-england-heres-what-it-means-for-travellers
What Travellers Should Expect Going Forward
If you’re planning a trip in 2026 or beyond:
- Expect small additional charges on hotel bills
- Compare prices carefully — some cities may include the levy in the room rate
- For longer stays, factor the levy into your budget
- Watch for city announcements on implementation timelines
If you operate accommodation:
- Prepare to adapt pricing models
- Watch for local consultations
- Review billing systems to ensure compliance
- Communicate levy details clearly to guests
Final Thoughts
The overnight-stay levy is a significant shift in how English cities can fund tourism and public services. While it adds a modest cost for travellers, it may improve long-term sustainability and investment in key tourist destinations.
As final rates, structures, and implementation dates are confirmed, travellers and accommodation providers should stay updated to plan confidently and avoid surprises.
Sources
- UK Government Press Release — https://www.gov.uk/government/news/levy-on-overnight-trips-will-help-mayors-invest-in-local-growth
- Reuters — https://www.reuters.com/world/uk/uk-government-gives-new-powers-mayors-england-introduce-travel-levy-2025-11-25
- Financial Times — https://www.ft.com/content/576496e1-8049-4c2b-98ba-9f2a1b3e8a14
- Travel & Tourism Reports — https://www.travelandtourworld.com/news/article/londons-proposed-tourist-tax-will-a-new-visitor-levy-drive-travelers-away-in-2026/
- Euronews Travel — https://www.euronews.com/travel/2025/11/26/tourist-tax-to-be-introduced-across-england-heres-what-it-means-for-travellers
- Shoosmiths Legal Analysis — https://www.shoosmiths.com/perspectives/stories/articles/tourist-tax-a-new-era-of-fiscal-devolution-in-england
- Hackney Citizen — https://www.hackneycitizen.co.uk/2025/11/27/levy-overnight-stays-240million-london/
Disclaimer: This article is for informational and educational purposes only. It does not constitute financial, legal, tax, travel, or professional advice.
