London is moving closer to introducing a long-debated tourist levy, with Mayor Sadiq Khan signalling cautious support amid reports that the government is preparing to devolve new fiscal powers to the capital. Chancellor (finance minister) Rachel Reeves is expected to grant London and other major English cities the authority to impose overnight visitor taxes through the English Devolution and Community Empowerment Bill now before Parliament.
The change would end England’s unusual position as the only G7 country where national government blocks local authorities from levying such charges. Scotland and Wales have already taken steps, with Edinburgh, Glasgow and Aberdeen preparing percentage-based levies and Welsh councils set to collect £1.30 per night from 2026.
London has made repeated calls for similar powers, arguing that a modest charge would raise significant revenue without deterring visitors. Estimates suggest a levy could generate up to £240m a year. In 2024, the capital recorded 8.9 crore overnight stays—one of the highest volumes among global primary cities.
A recent report commissioned by the Greater London Authority (GLA) and produced by the Centre for Cities examined levy systems across major international hubs including Paris, Milan, Munich, Toronto, New York and Tokyo. Models range from percentage-based charges in New York and Toronto to flat fees in Tokyo. Given the lack of a statutory national hotel star-rating system in the UK, the thinktank suggested London would be best suited to either a percentage levy or a flat nightly fee. Previous GLA analysis found that a £1-per-night charge could raise £91m, while a 5 percent levy could reach £240m.
The report also noted that London is unlikely to experience a sizeable drop in visitor numbers if the levy aligns with international norms. Highly popular destinations, research says, tend to face lower demand sensitivity to such charges.
Supporters argue that a tourist levy would strengthen local finances, improve infrastructure and offer councils greater flexibility to respond to visitor flows. Westminster Council, home to many of London’s biggest attractions, has long backed the idea, arguing its residents shoulder disproportionate service costs due to a daily influx of more than one million workers and visitors.
However, the hospitality sector remains strongly opposed. UK Hospitality chair Kate Nicholls warned the levy would burden British families, raise costs in an already high-tax environment and risk deterring visitors. She noted that hotel stays are already subject to 20 percent VAT, calling the proposal “a tax on a tax”.