Under the UK government's proposed English Devolution and Community Empowerment Bill, local authorities are expected to be granted the power to introduce a "tourist tax" on visitors staying in London. If implemented — a measure long requested by London Mayor Sadiq Khan — the capital could generate an estimated £240 million annually from the levy.
London recorded 89 million overnight stays in 2024.
Among G7 countries, the UK is the only one that restricts local authorities from applying a tourist tax.
Scotland and Wales have already introduced different models of accommodation levies. Wales will begin charging visitors £1.30 per night starting in 2026.
A study prepared by the Greater London Authority (GLA) highlights three main models used in G7 countries: percentage-based taxes, flat fees applied to all bookings, and tiered systems based on accommodation type or star rating.
New York and Toronto use percentage-based taxes, with New York collecting £493 million annually. Tokyo applies a flat fee but raises only £35 million per year.
As the UK does not have a national hotel star-classification system like France or Italy, the GLA recommends either a percentage-based or flat-fee model for London. A 2017 GLA estimate suggested a £1-per-night tax could generate £91 million a year, while a 5% levy could raise £240 million.
The study noted that similar schemes in comparable cities have not led to falls in visitor numbers, and tourists in popular destinations tend to be less sensitive to such charges.
If revenues are retained directly by local authorities, the tax could support economic growth, infrastructure investment and an improved business environment. Toronto's decision to increase its rate ahead of next year's World Cup was cited as an example.
UK Hospitality chief executive Kate Nicholls criticised the proposal, saying it would affect not only foreign visitors but also Britons travelling to London for business, family visits or events.
"We already pay 20% VAT. This is a tax on top of a tax. People vote with their feet; if visitors fall, London's economy suffers," she said.
Westminster Council leader Adam Hug said: "We have a daytime population of over a million but only 200,000 residents. Local taxpayers carry the burden of services. A lodging tax would help rebalance that."
Southwark and Brent councils also support the measure.
A spokesperson for the Mayor of London said: "A modest tourist levy, like in other global cities, would strengthen our economy, support growth and reinforce London's international standing."
