The Mayor of London, Sir Sadiq Khan, has cautiously welcomed reports that he may have the authority to impose a tourist levy on visitors staying overnight in the capital. The proposed measure is expected to be included in the English Devolution and Community Empowerment Bill, which is currently moving through Parliament. Chancellor Rachel Reeves is anticipated to grant Sir Sadiq Khan and other civic leaders the power to impose such a tax, which could generate up to £240 million annually, based on estimates.
Why Introduce a Tourist Levy in London?
In 2024, London saw 89 million overnight stays. Currently, England is the only country in the G7 group of advanced economies where local governments are prevented from introducing such taxes. Countries like Scotland and Wales have already implemented similar levies, with Scottish local authorities able to set their own tourist tax rates. In Wales, from 2026, visitors will be charged £1.30 per night.
How Would a Tourist Levy Work in London?
The Greater London Authority (GLA) recently commissioned a report to examine possible areas for further devolution, including a tourist levy. The report noted that other major cities like New York, Tokyo, Paris, and Milan have various types of tourist taxes. New York and Toronto implement percentage-based levies, while Tokyo uses a flat fee system.
In London, a levy could take the form of either a percentage-based system or a flat fee, given that the UK lacks the hotel classification system that countries like France and Italy use to determine taxes. Previous estimates by the GLA in 2017 suggested that a £1 levy could raise £91 million annually, while a 5% levy could generate as much as £240 million.
Would a Tourist Levy Benefit London?
According to the Centre for Cities think tank, a tourist levy could boost London’s economy by improving infrastructure and supporting local businesses. The flexibility of the levy would allow the mayor to adjust the rates based on visitor demand, with the ability to increase the tax rate for major events, such as the World Cup in North America next year.
Andrew Carter, CEO of Centre for Cities, emphasized the benefits of the approach being adopted in Scotland, where cities like Edinburgh and Glasgow are introducing percentage-based levies on overnight stays in various types of accommodation. He argued that a similar model could benefit London, provided the tax revenues are directed towards local government to improve public services and infrastructure.
The Hospitality Sector’s Reaction
Kate Nicholls, Chair of UK Hospitality, criticized the idea of a tourist levy, warning that it could negatively impact both international visitors and British families. She pointed out that many tourists visit London for leisure, business, and cultural events, and that the new tax could deter these visitors. She also highlighted the already high VAT rate in the UK, suggesting that an additional tax on accommodation could harm the tourism industry.
Support from London Boroughs
Some London boroughs, including Westminster, Southwark, and Brent, have expressed support for a tourist levy. Westminster, home to iconic landmarks like Buckingham Palace and the Houses of Parliament, has been advocating for a levy for years, arguing that it would help balance the financial contributions of daytime and nighttime residents. Boroughs such as these believe the levy could provide a new revenue stream to support local government services.
Sir Sadiq Khan’s Stance
While the mayor’s office has welcomed the prospect of a tourist levy, they have refrained from commenting on the specifics of the proposal, as no official decisions have been made. A spokesperson for Sir Sadiq Khan expressed that a modest levy, similar to those implemented in other global cities, would not only benefit the economy but also help reinforce London’s position as a top global destination for tourism and business.
What’s Next?
Though the chancellor is expected to announce the measure in the coming months, nothing has been formally confirmed. A spokesperson from the Ministry of Housing, Communities and Local Government stated that local leaders can already implement their own levies using the Accommodation Business Improvement District (ABID) model. Richmond Council, home to major attractions like Hampton Court Palace and Kew Gardens, is considering implementing an ABID, but any potential London-wide levy would likely replace these local initiatives.
