London’s mayor, Sir Sadiq Khan, has already expressed conditional backing for a new visitor levy. To clarify, this levy is aimed at visitors who are spending the night in the city. The English Devolution and Community Empowerment Bill might just set the stage for this new tax option. It’s set to bring in up to £240 million a year. As London prepares for an uncertain shift in the tides of tourism funding. The battle over what levy model would be best is where this debate is really warming up.
England now finds itself the only G7 nation that does not allow local councils the power to introduce tourist taxes. Mayors in England, too, are constrained by the same rule. This restriction has prompted calls for greater devolved powers, with Khan advocating for a modest tax that reflects similar measures already adopted by international cities.
As recently as 2019, London saw a healthy 89 million overnight visitor stays. This latest wave is a testament to the city’s status as one of the world’s leading tourism capitals. In light of this, the mayor’s office emphasizes that a well-structured tourist levy could enhance the local economy and reinforce London’s reputation.
“The mayor has been clear that a modest tourist levy, similar to other international cities, would boost our economy, deliver growth and help cement London’s reputation as a global tourism and business destination.” – A spokesperson for the mayor of London
Multiple successful models for adopting a tourist levy around the world. Take for example New York City, which uses a percentage-rate levy on stays, something that has been very lucrative, generating £493 million annually. Toronto uses certain percentage-rate levies on its accommodation taxes. By contrast, Tokyo introduces a flat fee system, still raising £35 million while disincentivising the majority of overnight stays.
Countries like France and Italy vary their tax rates based on location, type of accommodation, and official star ratings. At the same time, Scotland and Wales have recently adopted their own versions of tourist taxes. Starting in 2026, Welsh localities will be able to start charging travelers £1.30 per night.
Westminster has been lobbying Westminster on an overnight stay levy for several years now. Adam Hug, leader of Westminster Council, stressed the contrast between London’s daytime and nighttime populations. He stressed that local council tax payers are already subsidising services. This support goes a long way toward serving the millions more daytime visitors.
“We have a daytime population of over a million compared to a night-time population of about 200,000 and that means our local council tax payers are helping to subsidise things for the rest of London.” – Adam Hug, Westminster council leader
Hug stressed that there was exceptional urgency for an overnight stay levy. This new levy would go a long way towards leveling disparities and offering additional funding for creative projects across Westminster.
“So something through an overnight stay levy that helps redress that balance would be enormously welcome and enable us to do more creative things in the future.” – Adam Hug, Westminster council leader
Although the potential new levy is meant to bolster local economies, there are troubling signs for what it could indicate in terms of deterring consumer action. Kate Nicholls, chair of UK Hospitality, spoke out against the proposed tax last week. She worries that it will drive away visitors and impact on British families hoping to take short breaks in the capital.
“This will have a really big impact on British consumers; it’s a tax on hardworking British families having a short break in London and it will deter visitors from coming in.” – Kate Nicholls, chair of UK Hospitality
Nicholls pointed out that British consumers are already paying enough taxes. He cautioned that introducing such a tourist levy would drive them out of London and harm the local economy.
“Customers can vote with their feet; if we tax them out of coming to London, then we will tax the London economy out of jobs, growth and investment.” – Kate Nicholls, chair of UK Hospitality
During preliminary discussions about the proposed tourist levy, all stakeholders have expressed interest in exploring several different avenues. Andrew Carter, chief executive of Centre for Cities, advocated for a percentage-rate model similar to those being adopted in Scotland’s major cities. His solution was to give the local governments all of the revenues they could produce. This new strategy would stop prohibitions ordered by local preemption laws from state central bureaucracies.
“A tourist levy would benefit the capital’s tourist economy, provided the revenues go to local government – ideally split between City Hall and the boroughs – and are not ring-fenced by central government for specific purposes.” – Andrew Carter, chief executive of Centre for Cities
London’s possible introduction of a tourist levy is part of a larger shift occurring around the world in how cities are choosing to fund the impact of tourism. Meanwhile, other parts of the UK—most notably, Scotland and Wales—are adopting their own versions of these taxes. In the meantime, London’s growing strategy could provide a strong model of how big cities use tourism dollars to meet local needs.