London moves toward tourist tax under new devolution bill

Monday 24 November 2025 - 15:00

By: Sahili Aya

London moves toward tourist tax under new devolution bill

London is edging closer to introducing a tourist tax as part of the UK government’s proposed English Devolution and Community Empowerment Bill, a reform that would grant local authorities the power to levy charges on overnight visitors. City Hall estimates that the capital could raise up to £240 million per year, a prospect welcomed by several councils but strongly criticised by the hospitality industry.

The initiative would bring London in line with other major international destinations. In 2024, the city recorded 89 million overnight stays, yet—unlike its G7 counterparts—local authorities in England are currently barred from applying tourist levies. Scotland and Wales have already moved ahead with their own systems, with Wales planning to introduce a £1.30-per-night fee in 2026.

How the tax could work

A study by the Greater London Authority (GLA) outlines three models widely used across G7 nations:

Percentage-based taxes, such as those in New York and Toronto;
Flat nightly fees, like the system in Tokyo;
Tiered charges linked to accommodation type or hotel rating.

Because the UK does not operate a nationwide hotel star-classification system, the GLA suggests that London adopt either a flat fee or a percentage-based levy. Earlier estimates indicated that a £1-per-night charge could raise around £91 million, while a 5% tax could deliver the full £240 million.

Impact on tourism

The report notes that similar taxes elsewhere have not reduced visitor numbers. Major tourist cities tend to attract travellers who are less sensitive to small additional charges, meaning the economic risk for London is likely limited.

Economic and infrastructure benefits

If councils retain the revenue directly, the funds could bolster economic development, support infrastructure projects and enhance the city’s business environment. Toronto’s recent decision to increase its tourist tax ahead of the 2026 World Cup is cited as an example of such strategic investment.

Industry concerns

The hospitality sector remains opposed. Kate Nicholls, CEO of UK Hospitality, warned that the levy would hit both international visitors and domestic travellers coming to the capital for work or personal reasons.
“We already pay 20% VAT. This is a tax on top of a tax,” she argued, adding that any fall in visitor numbers could harm London’s economy.

Local authorities signal support

Several councils—including Westminster, Southwark, and Brent—support the reform. Westminster Council leader Adam Hug highlighted the strain on local services, noting that the borough hosts more than one million daily visitorsbut has only 200,000 residents.
“A lodging tax would help rebalance the pressure on local taxpayers,” he said.

A spokesperson for the Mayor of London added that a “modest, globally standard tourist levy” would strengthen the capital’s economy and reinforce London's global standing.