London to introduce Tourist tax

London is moving steadily toward the possibility of charging visitors for overnight stays, as the city prepares for new powers expected to be granted under the English Devolution and Community Empowerment Bill. The bill, now progressing through Parliament, is anticipated to give local leaders—including London’s mayor—authority to introduce a tourism levy for the first time.

A spokesperson for Sir Sadiq Khan said City Hall welcomed the direction of travel, describing a modest fee as a long-overdue tool that could bolster local revenue and strengthen London’s global competitiveness. However, officials stressed that no formal plans would be rolled out until the government makes its intentions clear.

If implemented, London would join the ranks of other major international destinations that already impose visitor charges. England is the only G7 nation where central government still blocks mayors from applying tourism taxes. Scotland and Wales, by contrast, have recently moved ahead with their own frameworks—Welsh councils are slated to collect £1.30 per night from 2026.

London’s case is compelling: in 2024 the capital recorded 89 million overnight stays, and estimates suggest that a visitor levy could generate anywhere between £90m and £240m annually, depending on the rate and structure.

A recent analysis commissioned by the Greater London Authority from the Centre for Cities surveyed tax models across the world’s primary cities. The research pointed to three dominant systems:

Percentage-based charges, used in New York and Toronto

Flat nightly fees, applied in cities such as Tokyo

Tiered charges, determined by accommodation category or “star” rating, seen in France and Italy

Because the UK lacks a statutory national hotel grading system, the researchers concluded that London would most likely benefit from a flat fee or percentage rate. A 2017 GLA assessment suggested that a £1 per night charge could raise £91 million, while a 5% levy could push revenues above £240 million.

Crucially, the study found no evidence that a visitor levy would significantly deter tourists, especially in world-leading destinations where travellers are less price-sensitive.

The Centre for Cities argues that a levy could become a strategic fiscal lever—funding improved public spaces, boosting local services, and giving the mayor flexibility to adjust rates as market conditions shift. The think tank pointed to Toronto’s decision to raise its levy ahead of the 2026 World Cup as an example of adaptive local control.

The proposal has not landed well with everyone. UK Hospitality chief Kate Nicholls called the prospect of a tax “shocking,” arguing that the measure risks burdening British families as much as overseas tourists.

She warned that London’s relatively high VAT rate already places heavy pressure on hotel guests, saying: “Customers can vote with their feet. If we increase the cost of staying in London, we risk pushing visitors elsewhere.”

Several London boroughs have spent years lobbying for exactly this kind of authority. Westminster Council, home to many of the UK’s most iconic attractions, said residents effectively subsidise the massive daytime population and that a citywide levy would help balance the fiscal load.

Other boroughs—including Southwark and Brent—have expressed similar support. Meanwhile, Richmond Council is exploring a local Accommodation Business Improvement District (ABID), though such schemes could be discontinued if a London-wide levy is introduced.

Although Chancellor Rachel Reeves is strongly expected to confirm the policy in the coming months, officials emphasise that no final framework has been approved. The Ministry of Housing, Communities and Local Government noted that places already have the option to launch levies via the ABID model, signalling that London’s approach could either complement or replace existing tools.

For now, City Hall is signalling readiness—waiting only for Westminster to clear the last political hurdle before London formally joins other global cities in charging visitors to stay overnight.