London is on the verge of joining a growing list of global cities that impose a tourist tax on overnight visitors, following signals from Mayor Sadiq Khan and mounting support from local councils. The move, which could raise up to £240 million a year, is seen as a pivotal step in devolving more fiscal powers to the capital while addressing the city’s unique infrastructure and economic needs.
The proposal comes as Chancellor Rachel Reeves is expected to grant London and other major English cities the authority to introduce such levies through the English Devolution and Community Empowerment Bill, currently moving through Parliament. According to BBC, Sir Sadiq Khan has long advocated for these powers, arguing that London—home to 89 million overnight stays in 2024 alone—stands to benefit significantly from additional revenue streams dedicated to improving the city’s tourism infrastructure and overall business environment.
Currently, England remains the only G7 country where national government blocks local authorities from implementing tourist taxes. In contrast, Scotland and Wales have already moved forward: Scottish cities like Edinburgh and Glasgow are introducing percentage-based levies, while Welsh councils will collect £1.30 per night from 2026. Across the Channel, Paris and Milan have location- and accommodation-based rates, while New York City and Toronto opt for percentage levies. New York, for example, raises £493 million annually from a £14.86 average nightly charge per visitor, according to the Centre for Cities thinktank.
The Greater London Authority (GLA) recently commissioned the Centre for Cities to examine options for further devolution, including the tourist levy. Their findings suggest that London would be best served by either a percentage-based or flat-fee system, given the absence of a statutory national hotel ‘star’ system like those in France and Italy. The GLA’s own estimates, dating back to 2017, indicate that a modest £1-per-day charge could generate £91 million, while a 5% levy could reach the projected £240 million mark.
“The model the government should adopt is already under way in Scotland, where Edinburgh, Glasgow and Aberdeen are introducing levies valued at a percentage rate on overnight stays in hotels, B&Bs and short-let accommodation,” said Andrew Carter, chief executive of Centre for Cities, as reported by the BBC. He emphasized the flexibility of a percentage-based approach, noting that rates could be adjusted to reflect fluctuations in demand.
Importantly, the Centre for Cities briefing concluded that London is unlikely to see a significant drop in visitors if it introduces a levy at rates comparable to other primary cities. Research shows that tourists are less price-sensitive in major, high-demand destinations. The report also highlighted that giving the mayor control over the tax rate and how the revenues are spent would allow for nimble responses to changing visitor patterns, much like Toronto did when it increased its levy ahead of the 2026 World Cup.
Sir Sadiq Khan’s office has welcomed the prospect of a tourist levy, though it has stopped short of making any concrete preparations until the legislation is finalized. “The mayor has been clear that a modest tourist levy, similar to other international cities, would boost our economy, deliver growth and help cement London’s reputation as a global tourism and business destination,” a spokesperson told the Local Democracy Reporting Service.
Not everyone is on board, however. The hospitality sector has voiced strong opposition, warning of potential fallout for both domestic and international tourism. Kate Nicholls, chair of UK Hospitality, described the proposal as “shocking” and argued, “Overseas visitors are incredibly important to central London but across London as a whole, this is builders coming to work, businesses coming to conferences, it’s families coming for concerts and theatres and going to see family and friends. This will have a really big impact on British consumers, it’s a tax on hardworking British families having a short break in London and it will deter visitors from coming in.”
Nicholls also pointed out that the VAT rate in England, Wales, and Scotland is already 20%, calling the tourist levy “a tax on a tax.” She warned, “Our customers are already paying the highest tax. Customers can vote with their feet, if we tax them out of coming to London, then we will tax the London economy out of jobs, growth and investment.”
Despite these concerns, the measure has found strong backing among London’s boroughs, particularly those bearing the brunt of tourism’s demands on local services. Westminster Council, which encompasses iconic sites like Big Ben and Buckingham Palace, has championed the idea for years. Council leader Adam Hug explained, “We have a daytime population of over a million compared to a night-time population of about 200,000 and that means our local council tax payers are helping to subsidise things for the rest of London. So something through an overnight stay levy that helps redress that balance would be enormously welcome and enable us to do more creative things in the future.”
Hug added, “There are huge pressures at the moment both on local councils and the government, so this small measure is unlikely to significantly affect consumer behaviour but what it would do is give local councils an important revenue stream to support the local economy.” Other councils, including Southwark and Brent, have also voiced their support for the measure.
The financial impact of the tourist tax could be transformative if the revenues are directed toward local government and not ring-fenced by the central government for other purposes. “A tourist levy would benefit the capital’s tourist economy, provided the revenues go to local government – ideally split between City Hall and the boroughs – and are not ring-fenced by central government for specific purposes,” Carter emphasized.
Meanwhile, the Ministry of Housing, Communities and Local Government has pointed out that local authorities can already introduce levies via the Accommodation Business Improvement District (ABID) model. Richmond Council, for example, is actively exploring the creation of an ABID for its borough, which includes attractions like Hampton Court Palace and Kew Gardens. However, if a London-wide levy is introduced, existing local schemes would likely be replaced to avoid duplication.
The timeline for implementation remains uncertain, as the chancellor’s formal announcement is still pending. Yet with the English Devolution and Community Empowerment Bill advancing and cross-party interest in strengthening London’s fiscal autonomy, it appears increasingly likely that the capital will soon join the ranks of cities like New York, Toronto, and Paris in charging visitors for the privilege of an overnight stay.
As the debate continues, the question remains: will a tourist tax bolster London’s infrastructure and global standing, or will it risk alienating visitors and stifling growth? For now, city leaders and stakeholders are watching Parliament closely, eager to see whether this long-discussed policy will finally become reality.