London proposes tourism levy capped at 5% for accommodation

London Mayor Sadiq Khan has confirmed a proposed tourism levy for the capital, which will be capped at 5% of accommodation costs. The tax is expected to apply to hotels, B&Bs, and short-term rentals like Airbnb. Revenue from the levy, estimated to generate between £250 million and £350 million annually, is intended to support London’s attractiveness as a destination and could be used to improve the city’s public transport network.

UK Transport Minister Heidi Alexander described the plan to use funds for transport improvements as “reasonable,” noting that international visitors actively use the city's transit systems. However, the proposal has met resistance from the business sector. UKHospitality CEO Allen Simpson and BusinessLDN CEO John Dickie expressed concerns regarding the impact on London’s competitiveness and the potential pressure on hospitality businesses. Industry leaders have suggested that funds should be directed toward projects that directly promote tourism rather than just infrastructure.

The government plans to introduce a formal bill in Parliament to grant mayors in England the power to implement such overnight visitor levies. If implemented, the London levy could be introduced as early as March 2028.