London is expected to implement a tourist tax on overnight stays, a policy shift that could raise up to £240 million annually and bring the capital in line with other major cities worldwide.
The proposal stems from the English Devolution and Community Empowerment Bill, which would grant Mayor Sadiq Khan the authority to impose the levy. Sir Sadiq has long advocated for such powers, emphasizing that it would address funding gaps and boost London’s economy. Currently, England is the only G7 nation where local authorities cannot implement tourist taxes, unlike Scotland and Wales, which have recently introduced their own versions.
Research by the Centre for Cities thinktank, commissioned by the Greater London Authority, highlights that other global cities like New York, Paris, and Tokyo use various tax models, including percentage rates or flat fees. The briefing suggests London would be best suited for a percentage or flat fee system, given the lack of a statutory hotel rating system in the UK. Estimates indicate that a £1 daily levy could generate £91 million, while a 5% rate might raise £240 million annually.
The potential revenue is significant, considering London recorded 89 million overnight stays in 2024. Studies show that popular destinations like London are unlikely to experience a significant drop in visitor numbers due to such taxes, as demand remains high. This flexibility could allow the mayor to adjust rates based on tourism patterns, similar to Toronto’s approach ahead of major events.
Support for the tourist tax has come from several London boroughs, including Westminster, where council leaders argue it would help balance the cost of services for the large daytime population. Other councils like Southwark and Brent have also endorsed the levy, viewing it as a vital revenue stream for local economies. However, the hospitality industry, represented by UK Hospitality, strongly opposes the move, warning it could deter visitors and harm jobs and investment.
Sir Sadiq Khan’s office has cautiously welcomed the proposal, stating that a modest tax would enhance London’s global standing and foster growth. The mayor’s spokesperson noted that any implementation would await formal government announcement, reflecting a measured approach. The Ministry of Housing, Communities and Local Government has indicated that existing models like Accommodation Business Improvement Districts could be integrated if a London-wide levy is introduced.
Looking ahead, Chancellor Rachel Reeves is expected to announce the decision in the coming months, though no specific timeline has been set. If approved, the tourist tax could pave the way for further fiscal devolution in the UK, empowering cities to better address local needs. The outcome will hinge on balancing economic benefits with stakeholder concerns, shaping the future of tourism and governance in London.
