UK Tourism Faces Potential Crisis as New Tax Could Make Holidays Costlier, Discourage Visitors, Affect Regional Growth

Published on November 26, 2025

UK tourism is facing a potential crisis as a proposed new holiday tax threatens to significantly raise the cost of domestic travel. Estimates suggest that millions of travellers could see their expenses surge, with VAT effectively rising to 27%, making holidays in England far more expensive than comparable destinations in Europe. Industry experts warn that the tax could discourage visitors, reduce spending in local communities, and put pressure on regional economies that rely heavily on tourism revenue.

Domestic travel remains a key driver of the UK economy. In 2024, residents took over 89 million overnight trips across England, spending a combined total of 255 million nights. The proposed tourism tax, based on the Edinburgh visitor levy model, could effectively raise VAT on holidays to 27%, placing England among the most expensive destinations in Europe. By comparison, holiday costs would be roughly double those in Paris and around 70% higher than trips to Barcelona or Rome.

The potential financial impact on households is considerable. Families planning even short breaks could see prices rise significantly, with businesses expected to pass the additional costs directly onto consumers. The resulting increase in holiday expenses could reduce disposable income for other essentials, adding pressure to household budgets and contributing to inflationary trends across the economy.

England’s tourism sector has seen steady growth, with domestic and international travellers flocking to coastal towns, historic cities, and scenic rural areas. A steep tourism tax could alter travel patterns, prompting visitors to consider alternative destinations, shorten trips, or cut back on spending. This shift could have a direct effect on local economies, particularly smaller towns and regions heavily dependent on tourism revenue.

Relative to other European destinations, England would become noticeably less competitive. Visitors to Paris currently pay roughly half the tax, while trips to Barcelona and Rome are considerably cheaper. The gap raises concerns about the country’s attractiveness to tourists, and could reduce revenue for hotels, restaurants, attractions, and other tourism-linked businesses, slowing the sector’s recovery and growth.

The tax also has broader economic implications. As operators pass on the cost to customers, household spending on other goods and services may decline, affecting local businesses and creating a knock-on effect across the economy. Regional areas that rely on tourism could see fewer visitors, leading to reduced employment opportunities and slower economic development.

The government has opened a consultation process on the proposal, providing an opportunity for feedback from the tourism and hospitality sectors. Key points of focus include the financial impact on consumers, competitiveness with European destinations, and potential effects on investment in tourism infrastructure. Striking a balance between generating revenue and keeping holidays accessible will be essential to sustaining the sector’s long-term growth.

Beyond economics, the proposed tax raises questions about England’s position in the European tourism market. Affordable and quality experiences are central to attracting both domestic and international visitors. Excessive taxation risks reducing visitor numbers, weakening competitiveness, and undermining efforts to promote the country as a leading travel destination.

Domestic tourism supports millions of jobs across hospitality, leisure, transport, and retail industries. Rising holiday costs could alter travel behaviour, shorten trips, and limit spending, affecting businesses and communities that depend on visitors. Maintaining accessible pricing is therefore critical for economic stability, regional development, and community well-being.

If implemented, careful planning will be required to manage both immediate and long-term impacts. Policymakers must weigh the burden on travellers against the potential benefits for public finances, ensuring that domestic tourism remains attractive, competitive, and sustainable. A balanced approach is needed to protect travellers, support the industry, and maintain regional economic growth.

The introduction of a tourism tax represents a significant turning point for the UK travel industry. Millions of domestic trips are taken each year, and the decisions made regarding taxation will shape the future of England’s tourism, influence household spending, and determine how the country competes within the broader European travel market.