London is expected to gain the authority to impose a tourist levy on overnight visitors, a change that could generate up to £240m a year and reshape how the city funds local infrastructure and services. The plan hinges on new powers contained within the English Devolution and Community Empowerment Bill, which Chancellor Rachel Reeves is expected to grant to Mayor Sadiq Khan and other civic leaders.
Devolution Shift Opens Door to Local Tourist Tax
England is the only G7 nation where national government currently prevents local authorities from charging overnight visitor levies. Scotland and Wales have already established such systems, with Welsh authorities set to collect £1.30 per night from 2026. London saw 89 million overnight stays in 2024, underscoring the scale of potential revenue.
The Greater London Authority recently commissioned the Centre for Cities to examine new devolution opportunities. The think tank compared levy systems across Paris, Munich, Milan, Toronto, New York, and Tokyo. New York raises £493m annually through a percentage-based levy with an average nightly charge of £14.86, while Tokyo uses a flat fee that generates £35m.
Because the UK does not have a statutory national hotel star-rating system, the think tank suggested London would be better suited to a percentage-based or flat-fee model. Earlier GLA estimates indicated that a £1 daily levy could raise £91m and a 5% levy could raise £240m.
Think Tank Findings Suggest Limited Impact on Visitor Numbers
The Centre for Cities concluded that London is unlikely to experience a substantial decline in visitor numbers if it introduces a levy comparable to those in other global cities. Research shows that visitors to major destinations tend to be less sensitive to small additional charges.
The think tank said revenues could support economic growth, infrastructure improvements and the wider business environment, particularly if the mayor is granted full control over how funds are used. It also pointed to Toronto, which plans to adjust its levy ahead of the 2026 World Cup, as a demonstration of the flexibility such systems provide.
Mixed Responses Across Industry and Local Government
Centre for Cities chief executive Andrew Carter said Scotland’s percentage-based systems in Edinburgh, Glasgow and Aberdeen offer the most practical model due to their adaptability. He argued that revenues should go directly to London’s government—split between City Hall and boroughs—to avoid restrictions imposed by central government.
UK Hospitality chair Kate Nicholls criticised the proposal, calling it “shocking” and warning it could deter visitors, including British families travelling domestically. She said overnight guests already bear high VAT rates of 20%, and argued that an additional charge risks discouraging tourism and harming jobs.
Westminster Council, which hosts many of London’s most visited sites, has advocated such a levy “for many years”. Council leader Adam Hug said its daytime population far exceeds its resident base, resulting in local taxpayers subsidising costs for visitors. He said a levy would help rebalance funding and enable future investment.
Other boroughs, including Southwark and Brent, have also voiced support.
Government Position and Potential Overlap With Existing Schemes
While the mayor’s office welcomed the reported plans, it declined to comment on “speculation” until formal announcements are made. A spokesperson reiterated that a modest levy, aligned with international norms, could strengthen London’s economy and reinforce its status as a global destination.
The Ministry of Housing, Communities and Local Government said it is open to discussions with local leaders. It noted that places can already introduce a charge through the Accommodation Business Improvement District (ABID) model. Richmond Council is exploring an ABID for its borough, which includes Hampton Court Palace and Kew Gardens, though existing schemes would likely be discontinued if a London-wide levy is introduced.
Featured image credits: Pexels
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