The government’s proposed levy on holidaymakers in England could “decimate tourism” by significantly reducing tourism spend and generating thousands of job losses.
That’s the claim by UKHospitality which commissioned research by Oxford Economics into the impact of the controversial plans.
In the 2025 Autumn Budget the government said it intends to allow mayoral strategic authorities in England to impose local overnight visitor levies for short-term accommodation. A consultation ran until February.
But according to the UKHospitality report, a 5% levy by 2030 would lead to a £1.8 billion reduction in tourism spending, 9 million fewer nights spent in accommodation and 33,000 jobs lost.
The research said it would also cause a reduction in GDP of £2.2 billion, a £1.6 billion tax increase for holidaymakers, £688 million in reduced tax receipts to the Treasury and a loss of £101m in direct investment from hospitality and tourism businesses.
Allen Simpson, chief executive of UKHospitality, said:
“The numbers are clear. A holiday tax would hike costs for Brits, make staycations more expensive and decimate tourism.
“There are no winners from a holiday tax. From coastal communities and city centres to local guesthouses, pubs and taxi firms, the impacts are stark and indiscriminate.
“Taxes up, jobs lost and our high streets hit once again. Holidays are for relaxing, not taxing. The government should keep it that way and stop the holiday tax.”
Matthew Dass from Oxford Economics added:
“Our modelling shows that introducing a holiday tax would have a clear economic impact.
“Across the wider economy, the policy is likely to have negative consequences. The additional revenue generated by the tax will be outweighed by reduced economic activity, as higher costs dampen tourism demand, ultimately leading to a loss in GDP.
“With England already operating at the upper end of VAT rates, an additional tax would further weaken the country’s competitiveness relative to other destinations and place additional pressure on consumers.”
In the introduction to the consultation, the government said:
“Investment in the places that people visit will help to build on England’s reputation as world-leading destination. The government is giving mayors powers to shape how a levy would apply in their region to ensure it is affordable and is invested in the most impactful way.
“We recognise that businesses, and potential visitors, may have concerns about the
effects of a new levy. We want to hear from you, and to build on best practice from
around the world, to ensure that the levy works for all involved, supporting local
investment and the visitor economy, and improving the visitor experience. Hearing
from businesses about how the levy can be well-designed to ensure it operates in a
stable and proportionate way is a vital part of this consultation.
“Local levies on overnight stays are common around the world – giving local leaders
the ability to introduce a visitor levy in their area will give them a choice to join with
their international counterparts in regional and national cities including Milan, Prague,
New York, Paris, and in other parts of the UK.”