English mayors propose 5% cap on new overnight visitor levy

Following the government's decision to grant 14 regional mayors in England the authority to implement an overnight visitor levy on accommodation, industry leaders and local officials are debating the tax's structure and impact.

Labour-led mayors, including Sadiq Khan of London and Andy Burnham of Greater Manchester, have indicated they intend to cap the new tax at 5%. In a letter to the Chancellor and Local Government Secretary, these mayors described a 5% rate as a “reasonable ceiling” that would allow for meaningful local investment while remaining subject to consultation.

However, UKHospitality Chief Executive Allen Simpson has challenged these mayors to support a reduction in the standard hospitality VAT from 20% to 10% as a prerequisite for introducing the new levy. Simpson argued that major European competitors like France, Spain, and Germany maintain lower VAT rates on holidays, and warned that combining a 20% VAT with a new holiday tax could create a significant financial burden for domestic travelers.