London tourist tax faces 5pc cap as mayors get levy powers

English mayors across the country are gaining the power to introduce a tourist tax on overnight stays under plans announced on Thursday, shifting tax-raising autonomy away from Westminster and into regional hands. According to Courthousenews, the move represents the first major step in a wider government decentralization strategy, supported by Courthousenews reporting on the No. 10 North office in Manchester. While the policy grants mayors the authority to levy uncapped percentages on hotel bills nationally, Dailymail reports via the BBC that surcharges in the capital will likely be capped at 5 per cent.

The changes arrive as part of a broader push to empower local leadership in areas with thriving visitor economies. Courthousenews notes that only six per cent of national taxes in the U.K. Are collected locally, placing the nation among the lowest shares in G7 countries. Proponents argue that giving mayors this tool will help close that funding gap, repairing roads, museums, public toilets, and tourist attractions. Courthousenews attributes statements to Housing, Communities and Local Government Secretary Angela Rayner, who said the measure allows mayors to make the most of local popularity and reinvest funds where needed most.

Reaction from regional leaders has been swift. London Mayor Lord Sadiq Khan stated that he strongly welcomed the plan and urged that it happen sooner rather than later, adding that a modest levy would strengthen London's global competitiveness. Courthousenews also notes that Andrew Carter, chief executive of the Centre for Cities, called the policy a milestone for local government autonomy. Additional support came from the Friends of the Lake District charity, which backed the plan to protect regional landscapes.

However, the tourism and hospitality sectors have voiced fierce opposition. Allen Simpson, chief executive of UK Hospitality, warned Courthousenews that the absence of a hard national cap in other regions could lead to aggressive taxation. Simpson pointed to modeling suggesting a 5% levy could cost 33,000 jobs and add up to £120 to a family holiday, cautioning that mayors might pull the tax lever until it snaps. Luke Petherbridge, Director of Public Affairs at ABTA – The Travel Association, similarly criticised the decision as damaging to industry competitiveness, telling Dailymail that the percentage-based model has already proved problematic elsewhere. Conservative Party leader Kemi Badenoch also condemned the move via Courthousenews, stating that taxation reduces jobs rather than creating them.

Under the proposed framework detailed by Courthousenews, the levy will not be mandatory. Mayors must consult local residents and businesses first and give accommodation providers advance notice. Charges will be calculated as a percentage of the room rate rather than a flat fee, and mayors cannot vary rates seasonally or by stay type. Hotels, bed-and-breakfasts, and short-term rentals like Airbnb will collect and remit the funds. Charities, refuges, and registered Romani and traveller camps receive national exemptions, alongside potential local campsite carve-outs.

What to Watch Next

• Legislation enabling the tourist tax powers is expected to advance during the current session of Parliament.
• Mayors across England will conduct local consultations with residents and businesses once the bill progresses.
• If approved by Parliament, local leaders could begin setting out operational spending frameworks and launching their regional levies by March 2028.

For more background on regional governance shifts, read our ongoing news coverage, or review previous reporting on how English mayors gain power to impose tourist tax on overnight stays and the timeline where English mayors granted powers to introduce tourist tax by March 2028.