Plans to grant mayors in England the authority to introduce a new levy on tourists are expected to be formally outlined on Thursday. This proposed tax would charge individuals for overnight stays, with local leaders determining how the generated revenue will be reinvested into their areas.

The concept, referred to as a "tourist tax," was initially proposed by Sir Keir Starmer's government in November and mirrors a similar system already in operation in Scotland. The levy is designed as a percentage of the accommodation cost, a structure the government suggests will help safeguard budget travel options.

While there is theoretically no upper limit to the charge, government sources indicate that ministers anticipate mayors will refrain from setting excessively high rates. Further details are anticipated following a meeting between Housing Secretary Angela Rayner and various mayors on Thursday. A government spokesperson stated that the decision on implementing such a tax and its specifics would rest with local leaders and their constituents.

The Overnight Visitor Levy, first mentioned in the King's Speech in May, means that holiday costs in England could increase if local authorities opt to implement it. While Andy Burnham, as Mayor of Manchester, previously introduced a "City Visitor Charge" of £1 per room per night to boost tourism, this new national proposal allows for a percentage-based fee.

Regional mayors have expressed that this levy is crucial for generating additional income to invest in local priorities and stimulate economic growth. However, the trade body UK Hospitality has raised concerns, warning that such a tax could escalate holiday expenses during a period of ongoing cost-of-living challenges, potentially impacting international competitiveness and discouraging domestic travel, particularly for families and younger individuals.

Similar overnight charges are common internationally, with cities such as New York, Amsterdam, and Rome already implementing them to fund local services. In London, Mayor Sir Sadiq Khan has voiced support for a tourist tax, with analysis suggesting it could generate over £350 million annually for the capital if a 3% levy on accommodation costs were introduced.

Scotland currently allows local authorities to implement a visitor levy as a percentage of accommodation costs. Edinburgh was the first city to introduce such a tax in July, charging an additional 5% on overnight stays, capped at five nights. Glasgow is set to implement a similar 5% levy in January 2027.

In Wales, a capped levy of £1.30 per person per night is scheduled to take effect next April. The government's broader devolution agenda aims to empower local leaders, with initial plans suggesting that revenue investment strategies would need to be set out by March 2028.