A two-week stay in England would cost more if regional mayors decide to introduce a levy on overnight accommodation.
Around 200 senior figures from accommodation providers including Butlin’s, Hilton and Travelodge have written to the Chancellor expressing concern about the commercial implications of what has been labelled a Staycation Holiday Tax. In a joint letter, coordinated by UKHospitality, they state that adding a local charge to accommodation bills risks affecting domestic demand at a time when operators are managing higher operating costs.
What is the Holiday Tax on Staycations?
Ministers confirmed in the Autumn Budget that English regional mayors would have the authority to impose a levy on overnight stays in hotels, short-term lets and other paid accommodation. The power is discretionary. No national rate has been prescribed and no automatic charge applies. Each mayor would determine whether to introduce a levy and at what level, following local consultation and publication of a rate structure.
Scotland and Wales already operate visitor levy systems. England does not currently apply a comparable charge.
Estimated Cost Impact
Industry modelling has focused on a potential charge in the range of £2 to £3 per person, per night. Applied across a 14-night stay, that level would increase the total cost for a family of four by between £112 and £168. The precise effect would depend on the final rate adopted and on whether the levy is structured as a fixed nightly amount or as a percentage of the accommodation price.
Flat per-person charges tend to have a greater proportional effect on lower-cost stays, while percentage-based models scale with the headline room rate. Final exposure therefore will be set entirely by how the levy is imposed within each specific region.
Accommodation operators are framing their objections in economic terms. Business rates are at unprecedented levels across much of the sector, and employment costs continue to rise. VAT on hospitality stands at 20%, which is higher than tourism VAT rates in several competing European markets.
From a commercial perspective, accommodation pricing sits within a competitive market that includes overseas destinations. Any upward adjustment to headline room costs alters comparative positioning. The extent of any resulting behavioural change would depend on the rate set and on how widely similar levies are adopted.
Next Steps
Government ministers describe the levy as a local revenue mechanism intended to fund transport, infrastructure and services associated with visitor activity. Adoption, however, remains optional. Mayors in London and Liverpool have publicly indicated support for using the new authority once operational.
The practical impact will only become clear once a mayor confirms a rate and implementation timetable. Until that point, projected cost increases remain indicative rather than fixed.
Author
Gill Laing is a qualified Legal Researcher & Analyst with niche specialisms in Law, Tax, Human Resources, Immigration & Employment Law.
Gill is a Multiple Business Owner and the Managing Director of Prof Services Limited - a Marketing & Content Agency for the Professional Services Sector.
