England’s Tourist Tax: A Step Toward Sustainable Tourism in Major Travel Cities, Here’s All You Need to Know

Published on November 27, 2025

In a major change to UK tourism policy, English Mayors were given the power to levy a tax on overnight stays. In the UK government’s most recent budget, this is the case for Manchester and for the rest of the UK. As this new tax is for the first time, it is foreseen to impact the UK tourism market significantly. The management concerning new tourism tax policies is crucial as prospective travellers from abroad and from within the UK consider whether to travel and at what price.

There is a plethora of new tax regulations to deal with. Whilst a handful of councils, including Manchester, already charge tax for hotel stays, the new tax structure adds to the levy for the diverse range of accommodation options which now include short-stay rentals, such as Airbnbs. In this great UK first, the UK can now join its European counterparts where tourist taxes are standard. The question then is how much taxes can be sustained and what impact will taxes have on travel?

Tourist Taxes: A Growing Trend Across Europe

Many popular travel destinations in Europe, including cities in Spain, Portugal, France, Switzerland, and Germany, already levy taxes on short-term accommodation. These taxes are typically used to fund local tourism infrastructure and to ensure that tourism growth remains sustainable. Now, with the UK following suit, it’s clear that tourist taxes are becoming a standard feature of the tourism landscape, especially in destinations heavily reliant on visitors.

In England, the introduction of the tourist tax is a response to the increasing need for funding to maintain and improve the tourism infrastructure. While some regions are excited about the potential for increased local revenue, others are hesitant, fearing the impact on the attractiveness of their destinations. London, Manchester, and other major cities are leading the charge, while some regions, like Tees Valley, have firmly rejected the idea.

How Much Could the Tourist Tax Raise?

The potential revenue generated by a tourist tax depends on several factors, including the amount charged and the volume of visitors. According to Office for National Statistics (ONS) data, international visitors to England stayed approximately 250 million nights last year. If a £1-per-night tax were applied across the entire country, it could raise up to £250 million. This figure only accounts for international visitors, but if the tax were also extended to domestic tourists, it could raise even more revenue.

The government estimates that applying a £1-per-night levy across the Greater London area alone could generate up to £91 million annually. More recent figures suggest that the tax could now raise more than £116 million based on the current level of overseas visitors.

However, these figures are based on the assumption that visitor levels would remain steady after the introduction of the tax. Critics have raised concerns that such a levy could deter potential tourists, particularly international visitors, from coming to the UK, especially if they feel the tax adds to the overall cost of their trip.

Potential Impact on Tourism and Travel Behavior

The introduction of a tourist tax could have a variety of effects on tourism and travel behavior. Some have expressed concerns that it may discourage international visitors from coming to the UK, particularly in the wake of the ongoing cost-of-living crisis. Higher taxes could make the UK a less attractive option for those seeking affordable travel destinations, especially when compared to European cities with lower or no such taxes.

Furthermore, domestic tourists may also be affected, especially if the tax leads to increased costs for families planning vacations within the UK. If British travelers are already feeling the squeeze from inflation, additional taxes could push them to consider traveling abroad, where they might not face such levies.

However, some academic studies, including a report on hotel charges in Manchester, suggest that the impact of tourist taxes on visitor numbers might be minimal. In fact, studies have found that tourism demand is often relatively inelastic—meaning visitors are less likely to be deterred by small increases in the cost of their trip, especially if they perceive the destination to offer unique experiences or value for money.

Local Leaders Support the Initiative: More Funds for Growth

Despite the concerns, there are strong voices in favor of the tourist tax. London Mayor Sadiq Khan welcomed the change, emphasizing that the tax would help to boost the local economy by funding essential services and infrastructure, particularly in a city that is one of the world’s leading tourism destinations. Similarly, Greater Manchester Mayor Andy Burnham voiced support for the initiative, stating that the additional funds would help sustain the city’s growth and tourism development over the next decade.

Steve Reed, the Housing Secretary, explained that the new tax policy would give mayors the ability to generate more money for local priorities, allowing cities to continue investing in growth and supporting their communities. This could include improvements in public transport, local attractions, and tourism infrastructure, making cities more attractive to both international and domestic visitors.

Opposition to the Tourist Tax: Local Concerns

While many cities are open to the idea of a tourist tax, Tees Valley Mayor Lord Houchen has firmly rejected it. He argued that introducing a tourist tax in Teesside, Darlington, and Hartlepool would not be beneficial for the region and would hurt the local economy. This highlights a regional divide, with some areas embracing the tax as a source of revenue for public services, while others worry it could harm their ability to compete with other tourist destinations.

Furthermore, the hospitality industry has voiced concerns that additional charges could reduce demand for short-term accommodation, especially in areas that are heavily dependent on tourists. The potential for inflationary pressures and the risk of alienating visitors is a major concern for many business owners, who fear that the tax could lead to lower occupancy rates and reduced sales.

Tourist Taxes in Scotland and Wales: A Broader Trend

The discussion around tourist taxes isn’t confined to England alone. Both Scotland and Wales have already introduced or are planning their own forms of tourist taxes. In Wales, the levy will be up to £1.30 per night and can be implemented by local authorities after April 2027. In Scotland, Edinburgh has already announced a 5% tax on stays starting July 2026, with Glasgow and Aberdeen planning similar measures.

This indicates a broader trend across the UK where local authorities are seeking ways to benefit from the growing tourism industry without burdening their residents. By tapping into the influx of tourists, these regions hope to generate additional funding for infrastructure improvements, sustainability efforts, and the development of more inclusive tourism offerings.

The Future of Tourist Taxes in the UK

The new tax will be one of the first steps England will need to take in order to have more sustainable tourism policies. Although it is unknown how the new tax will affect the tourism industry, it will definitely be a source of funds to help the community in activities to assist travelers as well as the community.

As revenue potential fuels local growth in London and Manchester, other UK cities must find the right revenue to visitor balance. Evidence of the enhanced tourism experience, improved tax-funded infrastructure, and revitalized local economy will balance the trade-offs and ensure the success of this initiative.

England is the last of the UK constituents to implement a tourism tax, and in this regard, other countries in Europe may follow the model to develop more sustainable tourism.