Planning a Trip to London? Here is How the New Tourist Tax Will Affect Your Visit

Published on November 23, 2025

London, a city that sees millions of visitors each year, is on the verge of implementing a tourist tax for overnight visitors. The idea, which could raise up to £240 million annually, is part of a broader strategy to improve the city’s infrastructure and tourism economy. With 89 million overnight stays in 2024 alone, the proposed tax is expected to generate significant revenue, but it’s also raising questions about the impact on visitors and the capital’s vibrant tourism sector.

• Estimated revenue of £240 million per year
• Potential to boost London’s infrastructure and tourism economy
• Concerns about visitor reactions and potential impacts on demand

This article delves into the specifics of London’s proposed tourist levy, the key benefits, possible drawbacks, and how it compares with other international cities that have already implemented similar taxes. As the proposal makes its way through Parliament, it’s essential to understand how this could shape London’s tourism landscape moving forward.

What Is the London Tourist Tax?

The tourist tax is a levy that would apply to people staying overnight in the capital. This could be a flat rate or a percentage of accommodation costs, similar to systems in cities like New York and Paris. The proposal has been backed by Mayor Sadiq Khan and several London boroughs, with initial plans to raise up to £240 million annually. This money would be reinvested into the city’s infrastructure, benefiting both locals and tourists.

• Estimated tax rate: £1 to £5 per night per visitor, depending on the model.
• Projected revenue: £240 million annually, based on 89 million overnight stays.
• Funds would be reinvested in London’s infrastructure, public transport, and services.

This new levy aims to ensure that visitors contribute to maintaining the city’s world-class attractions, public services, and transportation networks. Given that London is the most visited city in the UK, it’s argued that such a tax is long overdue, especially in light of the challenges faced by local governments.

How Would It Work? Exploring the Models

The tourist tax could take several forms, depending on what the city chooses to implement. Based on research from the Centre for Cities, there are three primary models used in major global cities, and London might opt for one of these based on what best suits its needs.

1. Flat Fee System:

A flat fee could be charged to every visitor, regardless of the type of accommodation they stay in. For example, Tokyo uses this model, charging a fixed fee per night to all visitors.

• Tokyo’s approach raises £35 million annually, despite having the highest number of overnight stays of any primary city.

2. Percentage-Based Levy:

Another model is a percentage-based charge on the accommodation cost, a system used in New York City and Toronto. This system charges a percentage of the cost of the accommodation, with the total tax depending on how much the visitor spends on lodging.

• New York City raises £493 million annually with an average nightly tax of £14.86.

3. Hybrid System:

A third option is a hybrid system, combining both a flat fee and a percentage rate based on the type of accommodation or location in the city. This could be an ideal solution for London, as it would allow flexibility based on demand and type of visitor.

• In France, tourists are charged differently depending on their accommodation’s star rating and location.

For London, estimates suggest that either a flat fee or a percentage levy could raise up to £240 million annually. Given the number of visitors and the wide variety of accommodations, the hybrid model may offer the most flexible and fair solution.

What Impact Will the Tourist Tax Have on London’s Economy?

The introduction of a tourist tax could have far-reaching effects on London’s tourism economy. On the one hand, the tourism industry could benefit from an influx of much-needed investment into local infrastructure, public transport, and city services. On the other hand, the tax might deter some visitors, particularly those who are budget-conscious or who see London as an already expensive destination.

Benefits for London’s Economy:

• Revenue for city infrastructure: Revenue would support public services that directly benefit visitors, including transport, attractions, and safety measures.
• More targeted investment: Funds could be used to improve amenities and the overall tourist experience in the city.
• Reduced pressure on local taxpayers: The tax would help spread the cost of maintaining London’s tourism infrastructure across visitors rather than relying solely on local residents.

Potential Drawbacks:

• Increased cost for visitors: While London may remain an attractive destination, the added cost could deter some visitors, particularly those on short stays or with limited budgets.
• Impact on smaller businesses: Smaller hotels and B&Bs might feel a greater pinch from the tourist tax than large hotels, potentially making London less competitive with other cities.
• Change in visitor patterns: Some tourists might choose other destinations with no such taxes, reducing the influx of international visitors in the short term.

How Will the Hospitality Industry Respond?

UK Hospitality, the trade association representing the hospitality sector, has voiced strong opposition to the tourist tax. They argue that it will particularly hurt domestic tourists, families, and small businesses in the hospitality sector. Since London already has a high VAT rate (20%), adding another tax could make the city even more expensive.

However, proponents argue that the tourist tax will provide a much-needed revenue stream to improve the very infrastructure that draws people to the city in the first place. With London being a global tourism hub, it is unlikely that a modest levy will dramatically reduce visitor numbers.

A Look at Other Cities: Lessons for London

London is not alone in considering a tourist tax. Cities across Europe and North America have already implemented such taxes, with varying levels of success. For instance:

• Scotland has introduced tourist levies in Edinburgh, Glasgow, and Aberdeen, allowing local authorities to set rates as a percentage of the accommodation cost.
• Paris charges tourists depending on the star rating of their accommodation, with rates varying significantly based on where visitors stay.

These examples show that with proper implementation, a tourist tax can be beneficial for both visitors and the local economy, with funds reinvested in city services and tourism-related infrastructure.

What’s Next for London’s Tourist Tax?

The tourist tax proposal is currently in the hands of lawmakers. With the English Devolution and Community Empowerment Bill making its way through Parliament, it’s expected that Sadiq Khan will gain the authority to implement the tax in the near future.

• Government approval: The Chancellor is expected to give the go-ahead for the tax in 2024.
• Implementation timeline: The levy could be implemented as early as 2024 or 2025, depending on Parliament’s decision.

If successful, London’s tourist tax could become a model for other cities around the world. It would represent a sustainable model for funding tourism infrastructure, ensuring that future generations of visitors can continue to enjoy the city’s attractions.

Conclusion: Will the London Tourist Tax Be a Success?

The introduction of a tourist tax in London could provide a much-needed boost to the city’s infrastructure, ensuring its long-term appeal to visitors. While it may face opposition from some quarters, particularly in the hospitality industry, the revenue generated could have a significant positive impact on the local economy.

London’s status as a global tourism hub means that the tax is unlikely to deter visitors in the long run. Instead, it may offer a more sustainable approach to funding public services and ensuring that the city remains one of the world’s top destinations for both tourists and business travellers.