Hotel levies explained: A help or hindrance to the industry?

Nottingham, Edinburgh and Liverpool have become the latest UK cities to announce the implementation of a new type of ‘tourist tax’ on hotel stays. They join Manchester which already has a £1 per room, per night charge in place for visitors, on top of their bill.

The schemes are growing in popularity after success across Europe in cities such as Paris, Bruges and Barcelona, which allow local authorities to implement a ‘transient visitor levy’ on short-stay travellers.

But there is a catch; local authorities in England are not actually legally allowed to tax tourists.

So, how do Local Authorities impose a levy?

British cities like Manchester have introduced a legal workaround to bring in a levy for tourists, by incorporating accommodation into their existing Business Improvement District (BIDs) Zones and applying the same levy as they do to other businesses that fall within it. So, from April 2023, 78 accommodations in Manchester were included in its BID zone, and guests now pay to cover the new charges imposed on those buildings.

This levy raised more than £2.8million in its first year, creating much-needed funds for new initiatives to boost tourism and support the hospitality industry in the city.

Seeing this success, Nottingham and Liverpool are following suit in England, with similar BID charges set to start from summer 2026, earmarked to help raise funds to improve their visitor economies. The London Mayor, Sadiq Khan, is also reported to be looking into a new levy for the capital, after seeing Manchester’s success.

In Scotland, however, the Government has taken this one step further, by voting in favour of legalising a 5% enforced tourist tax on overnight stays in popular areas like Edinburgh, Glasgow and the Highlands, capped at five nights, starting in July 2026.

In Wales, the government has also voted in favour of an optional tourist tax to raise a forecast £33 million annually, which each of its 22 councils can choose to introduce from 2027.

Opposition to the levy

Despite the plans to reinvigorate the UK tourism industry, these new levies have not come without a fair share of controversy in recent years.
Bournemouth saw plans for a new tourist tax thrown out by the Secretary of State for Housing, Communities and Local Government last summer after 42 hotels petitioned against it. The hotels from across Bournemouth, Christchurch and Poole objected to the proposed £2 per room, per night tax, claiming it would deter guests from staying due to the increasing costs, losing them vital business income.

UKHospitality has recently backed these claims, calling the tourist tax ‘damaging’ to the hospitality industry because it could make the UK less attractive to visitors.

The benefits of Tourist Tax

Although there is opposition to levies in the UK, there is clear financial benefit for cities that impose them.

For example, the Edinburgh levy is set to raise £50 million per year, to fund cleaner streets, quicker removal of graffiti, environmental improvements, more attractive spaces and better transport connections; all in aid of further boosting tourism to the city.

In Liverpool, the newly proposed levy is predicted to raise £6.7 million over the first two years, which is set for investment in hospitality, events and cultural venues.

The future for hotels

Hoteliers are understandably wary of new levies pushing prices up for visitors and the impact this will have on their booking numbers and ultimately, profits.

Despite this, the latest research has predicted that a country-wide, £1.25 nightly charge per person could raise £560 million for the economy, and the demand for tourist tax legislation seems to be growing from government officials.

This is set to be a hot topic for hoteliers, and something for hospitality bosses to consider when budget planning over the coming months.