Sadiq Khan Tourist Tax Could Add 5% to Accommodation Bills
The Sadiq Khan tourist tax could make overnight visits to London pricier, but supporters believe it could raise hundreds of millions of pounds to improve the capital.
The UK government has announced plans to give mayors in England the power to introduce an overnight visitor levy on paid accommodation. The change would allow London Mayor Sadiq Khan to place a charge on stays in hotels, holiday rentals and potentially other types of visitor accommodation.
Khan has welcomed the announcement and said he wants the new power to be introduced “sooner rather than later”.
City Hall is considering how a London scheme might operate. Reports suggest that the levy could be set at no more than 5% of the accommodation, but the final rate, exemptions and spending rules have yet to be confirmed.
The mayor argues that a modest charge could help London manage the pressure created by millions of annual visitors while also providing additional money for infrastructure, culture and tourism.
Hospitality businesses, however, warn that London is already an expensive destination and that another charge could damage hotels, restaurants and other companies that depend on visitors.
What Is the London Tourist Tax?
The proposed London tourist tax would be a percentage-based charge added to the price of an overnight stay.
It is not a fee for entering London or visiting individual attractions. Day visitors would not pay it simply for travelling into the capital.
Instead, accommodation providers would probably collect the levy when guests paid for rooms. It could cover hotels, serviced apartments, short-term rentals and platforms such as Airbnb, depending on the final regulations.
Although it is commonly called a “tourist tax”, it may not apply only to international tourists. British families taking a short break, people travelling for work and visitors staying overnight for medical, educational or personal reasons could also be affected unless specific exemptions are introduced.
The government intends to introduce legislation giving English mayors the necessary powers. Officials have said those powers should be available by March 2028, meaning the tax is not being charged yet.
How Much Could Visitors Pay?
A levy of up to 5% would mean that the amount paid depends on the cost of the accommodation.
For example:
| Room price per night | Possible 5% levy | Three-night charge |
|---|---|---|
| £100 | £5 | £15 |
| £150 | £7.50 | £22.50 |
| £230 | £11.50 | £34.50 |
| £400 | £20 | £60 |
Industry research cited by the London Standard puts the average London hotel price at approximately £230. At that price, a 5% tax would add around £11.50 for each night.
A family spending four nights in a £230 room could therefore pay an additional £46.
The percentage model would place a smaller charge on budget accommodation and a larger one on luxury hotels. Supporters say this is fairer than the percentage model, a fixed fee, because the amount rises according to what a visitor can afford to spend.
Some hospitality representatives would prefer a flat charge of approximately £2 or £3 per night. They argue that a 5% levy could become particularly expensive because London hotel prices are already higher than those in many other European cities.
How Much Money Could London Raise?
A City Hall review reportedly estimates that the Sadiq Khan tourist tax could raise around £250 million each year.
The final total would depend on the tax rate, hotel occupancy, visitor numbers and any exemptions. It would also depend on whether the levy applied throughout Greater London or only in particular areas.
London attracts tens of millions of visitors in a typical year. Even a relatively small charge collected across millions of overnight stays could therefore generate substantial revenue.
The potential income is one reason Khan and other English mayors have campaigned for the power to introduce visitor levies.
Manchester has operated a smaller accommodation charge since 2023. Edinburgh introduced a 5% visitor levy in July 2026, limited to the first five nights of a stay. Similar charges are common in cities such as Paris, Berlin, Amsterdam and Lisbon.
What Could the Tourist Tax Pay For?
Detailed spending decisions have not been made, but Khan says the money should be reinvested in London’s visitor economy.
Possible uses include:
- Improving public spaces and streets around major attractions
- Supporting London’s museums, theatres and cultural organisations
- Funding festivals, exhibitions and major public events
- Promoting London to domestic and international visitors
- Improving transport connections in busy tourist areas
- Providing more public toilets and visitor facilities
- Supporting street cleaning and waste collection
- Improving accessibility for disabled visitors
- Managing overcrowding around popular destinations
- Strengthening safety and security in the night-time economy
The levy could also help boroughs cover the cost of services used by tourists.
Areas such as Westminster, Camden, Kensington and Chelsea, Southwark and Tower Hamlets receive enormous numbers of visitors. Local councils must clean the streets, maintain public areas and manage crowds, but visitors do not pay council tax.
Supporters argue that an overnight levy would allow guests to make a small contribtoowards the services and infrastructure they use.
Khan has said the money could strengthen London’s attractions and help the capital remain globally competitive. However, hospitality businesses want firm guarantees that the revenue will support tourism rather than fill unrelated gaps in public finances.
Could the Tax Damage London’s Tourism Industry?
The hospitality industry believes it could.
London hotels already charge 20% VAT, which is higher than the sales taxes applied to accommodation in several competing European destinations. Businesses also face higher wages, energy bills, property costs and business rates.
Adding another charge could make London seem less affordable, especially for families and budget travellers.
UKHospitality has warned that introducing a 5% levy across England could threaten jobs and reduce economic activity. Research cited by the organisation estimates that such a charge could cost up to 33,000 jobs nationally by 2030 and reduce economic output by £2.2 billion, according to Reuters.
There is also concern about administrative work. Hotels and short-term rental operators would need to calculate, collect and transfer the money, while also managing exemptions and refunds.
However, evidence from cities that already have visitor levies does not clearly show that modest charges cause a major fall in tourism. Travellers often consider total holiday costs, transport links, attractions and convenience rather than making decisions based on one small fee.
London’s global popularity may also protect it from a significant decline in demand.
Will Londoners Have to Pay the Tax?
London residents would not pay the levy while living in their homes.
However, a Londoner booking a hotel or short-term rental in the capital could potentially be charged. This would depend on whether the final scheme includes an exemption for local residents.
British visitors from outside London would probably pay in the same way as international tourists.
This is why critics argue that “tourist tax” is not a completely accurate description. The levy would be connected to an overnight stay rather than a person’s nationality or reason for travelling.
Potential exemptions could be created for homeless accommodation, emergency housing, people receiving medical treatment or certain educational stays. These decisions would need to be addressed during consultation.
What Happens Next?
Parliament must first pass legislation giving English mayors the power to introduce an overnight visitor levy.
City Hall would then need to consult London boroughs, accommodation providers, hospitality organisations, residents and tourism businesses before approving a final scheme.
Important decisions would include:
- The percentage charged
- Which accommodation would be covered
- Whether the levy would have a maximum number of nights
- Which visitors would be exempt
- How businesses would collect the money
- How revenue would be divided between City Hall and borough councils
- Which projects would receive funding
Until that process is completed, London does not have an active tourist tax, and visitors should not be charged one under the proposed City Hall scheme.
Conclusion
The Sadiq Khan tourist tax could raise approximately £250 million a year for London, providing valuable funding for public spaces, transport, cultural attractions and visitor services.
For an average hotel costing £230 per night, a 5% levy would add around £11.50 to the daily bill. That may appear modest for a short visit, but it could become a noticeable expense for families, business travellers and people staying for longer periods.
Whether the scheme benefits London will depend on its design. A reasonable rate, clear exemptions and firm guarantees about how the money is spent could help maintain public and business support.
If the charge becomes too high or the revenue disappears into general budgets, it could damage confidence in the policy and place additional pressure on London’s hospitality industry.
The central question is therefore not only whether visitors should pay more but also whether London can prove that their contribution will make the city a better place to visit.
