London Expected to Introduce Tourist Tax as New Powers Move Forward

London appears to be moving closer to introducing its first tourist tax, a policy long requested by Mayor Sadiq Khan and local leaders who argue that the capital needs more control over its own finances. Reports suggest that Chancellor Rachel Reeves is preparing to grant London and other English regions the authority to implement overnight visitor levies. The change is expected to be included within the English Devolution and Community Empowerment Bill, which is currently progressing through Parliament.

For years, mayors and councils have pushed for this form of fiscal autonomy. Estimates suggest that London alone could generate up to two hundred forty million pounds every year through a modest levy. These funds could support public services, maintain visitor infrastructure and offset the increasing costs of hosting millions of tourists.

England Stands Apart From Other G7 Countries

At present, England is the only nation within the G7 that does not allow local authorities or elected mayors to introduce a tourist levy. Other advanced economies, including France, Germany, Italy, Canada, the United States and Japan, already operate various forms of visitor charges. Scotland and Wales have also moved ahead, with both nations recently introducing different systems of taxes for overnight stays.

In Scotland, local councils may set a percentage charge based on the accommodation bill. Wales is expected to begin collecting one pound thirty per night from visitors starting in 2026. England’s absence from this practice has long puzzled analysts, especially given the heavy tourist traffic in cities like London, Manchester and Liverpool, where visitor related pressures on transport and public services are significant.

How a Tourist Levy Might Work in London

To better understand what form such a tax could take, the Greater London Authority recently asked the Centre for Cities think tank to examine international models. Their briefing looked at how major global cities within the G7 structure their visitor levies. Paris, Munich, Milan, New York, Toronto and Tokyo all apply some form of overnight charge, though the methods vary widely.

New York and Toronto use a percentage based system, meaning visitors pay a portion of their nightly accommodation bill. New York raises nearly five hundred million pounds every year through this approach, with an average charge of just under fifteen pounds per night. Toronto collects considerably less but relies on the same structure.

Tokyo uses a flat fee, where all visitors pay the same amount regardless of accommodation type. Although Tokyo welcomes more overnight guests than any other primary city examined, its levy brings in around thirty five million pounds annually. France and Italy operate more complex systems, with fees based on location, property type and official star rating.

The Centre for Cities report concluded that London would likely adopt either a flat fee or a percentage system. Britain does not use a nationwide star rating system like France and Italy, making a tiered structure less practical. The authors argued that London’s economic profile and tourist volume make it well positioned to benefit from a simple and predictable fee structure.

Expected Revenue and Visitor Impact

Based on earlier research, the GLA estimated that applying a one pound daily levy to both domestic and international visitors could generate around ninety one million pounds each year. A five percent charge on accommodation bills could raise as much as two hundred forty million pounds. These figures highlight the substantial financial potential for the capital, which faces rising demands on public transport, policing, waste collection and cultural services.

The think tank also concluded that introducing a tourist tax is unlikely to deter visitors. London competes with other major cities that already apply similar charges, yet they continue to attract millions of tourists annually. When the levy remains modest and transparent, travellers typically accept the additional cost as part of the experience of staying in a global city.

A Step Toward Greater Devolution in England

For London, the introduction of a tourist tax would represent more than just a revenue tool. It would mark an important moment in the broader devolution movement across England. Local leaders have long argued that cities should have more authority to shape policy according to their own economic and social realities. A visitor levy would help London manage the pressures that come with its global status while reducing reliance on central government funding.

As Parliament debates the bill, attention will remain focused on how quickly these new powers can be granted and how London plans to structure the levy once it receives approval. For now, the mayor has cautiously welcomed the prospect, calling it a long-overdue chance to strengthen the city’s financial independence.