Tourist Tax Expected for London as City Prepares Major Policy Shift | All You Need To Know

London is set to impose a tourism tax for overnight stays, as Mayor Sadiq Khan clears the way to back a new charge on visitors staying in hotels and short-term lets. The plan would help tap into London's booming tourism industry, raising some much-needed cash for infrastructure and public services.

How Much Money Is at Stake?

Estimates put the potential money raised by a tourist levy at as much as £240 million a year. Internal financial projections suggest a 5% charge on accommodation costs, or a similar flat-fee model, could raise significant funds.

In 2024, London recorded 89 million overnight stays, providing a sizeable base for the proposed tax.

Who Will Authorize the Tourist Tax in London?

The tourist tax will be implemented in relation to changes to national legislation yet to come. Chancellor Rachel Reeves is set to allow mayors in England, such as London, the authority to enforce the levy by amending the English Devolution and Community Empowerment Bill.

The oversight committee at City Hall has recommended instituting the tax no later than the 2027–28 financial year by introducing a formal proposal and consultations with stakeholders.

What form could the levy take?

Experts have tried a few models:

• A flat-rate per night fee, such as £1–£2 per stay, similar to that in other global cities.

• A percentage-based levy: for example, 5% of the room rate, which could raise up to £240 million, depending on final design.

• A hybrid model inspired by Paris, Berlin, or Barcelona, with an accommodation mix suited to London.

City analysts believe that London would not suffer from a sharp decline in visitor numbers if the levy stays modest and generally in line with practices in peer global cities.

For what will the Tourist Tax Money be used?

If instituted, revenues from the levy could be reinvested in the city’s infrastructure, cultural institutions, tourism marketing, and public realm improvements.

Supporters argue the levy would give London more fiscal flexibility and allow the capital to respond more dynamically to tourism trends and infrastructure needs.

Are there People Who are opposing Tourist Tax?

Resistance exists, however, especially from the hospitality industry. Trade groups argue that it may unfairly target not just tourists, but also families and business visitors.

Critics claim that since VAT is already levied at a rate of 20%, this could result in an additional overnight charge being viewed as a sort of “tax on a tax.”

Does London's Government Back It?

London's mayoral office has voiced cautious optimism. A spokesperson said a modest tourist levy - like models being used in cities around the world - "would boost our economy, deliver growth and help cement London's reputation as a global tourism and business destination."

At the same time, local authorities such as Westminster, Southwark, and Brent have expressed support, citing a potentially new revenue stream for public services and tourism-related infrastructure.