Reeves moots tourist tax

Chancellor Rachel Reeves is reported to be considering giving mayors powers to raise taxes as part of the Budget later this month.

UKHospitality said: “If this happened, it would be another significant U-turn by the government, just two months after Sir Chris Bryant MP, then Tourism Minister, told the House of Commons it “had no plans to introduce a tourism tax”.

This follows a letter sent to UKHospitality by James Murray MP, then Exchequer Secretary, where he also said the Government had no plans to introduce such a tax.

Brits took over 89 million overnight trips in England in 2024 and stayed for total of 255 million nights, according to Visit Britain. A 5% holiday tax would cost the public £518m in additional tax.

The organisation said that holiday taxes were charged to consumers on top of the price of accommodation, like VAT. The combination of 20% VAT, a 5% holiday tax, plus the VAT charged on the tax itself, would create an effective 27% VAT rate for consumers on their holidays, making it one of the highest in Europe.

Kate Nicholls, Chair of UKHospitality, said: “If this is true, it would be another shocking U-turn from a Government who committed in the House of Commons only two months ago that it would not introduce a tourism tax, and in fact promised the industry the same thing in writing.

“I know the government is worried about the cost of living, but this holiday tax is little more than a higher VAT rate for holidaymakers. Brits take over 89 million overnight trips in England, and stay for a total of 255 million nights.

“This is a bill we will all have to pay, and will only serve to ramp up prices and drive inflation. It would effectively hike our VAT rate to 27% at a time when Ireland has cut VAT on hospitality to 9% and Germany already has a VAT level of 7%.

“We need to get consumers spending. But this, on top of the huge damage from last year’s Budget, would only mean people cut back more – and more jobs are lost. Hospitality cannot foot the bill for the rest of the economy yet again. I hope the government will reaffirm the commitment it gave in Parliament just two months ago and not introduce a holiday tax.”