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London mayor cautiously backs proposed tourist levy
London Mayor Sadiq Khan has signaled support for plans to introduce a tourist levy on overnight visitors, a measure expected to be enabled through Chancellor Rachel Reeves' upcoming English Devolution and Community Empowerment Bill. If implemented, the levy could generate up to £240 million annually for the capital, according to earlier estimates.
The proposal would align England with other G7 nations, where local authorities already impose such charges. London, which recorded 89 million overnight stays in 2024, remains the only major global city in the G7 without this fiscal tool. Scotland and Wales have recently adopted their own models, with Welsh councils set to collect £1.30 per night from visitors starting in 2026.
How peer cities structure tourist levies
A recent briefing by the Centre for Cities thinktank, commissioned by the Greater London Authority (GLA), analyzed levy systems in G7 capitals. New York City and Toronto apply percentage-based charges-New York's 14.86% rate yields £493 million yearly-while Tokyo uses a flat fee, raising £35 million despite its status as the world's most-visited primary city. French and Italian cities tie rates to accommodation type and official star ratings, a model the briefing deemed less suitable for London due to the UK's lack of a standardized hotel classification system.
The GLA's 2017 assessment suggested a £1 nightly fee could raise £91 million, while a 5% levy might reach £240 million. The Centre for Cities concluded that London's popularity would likely shield it from significant visitor drop-offs, citing research that tourists in high-demand destinations are less sensitive to modest additional costs.
Industry pushback and local support
Critics, including UK Hospitality chair Kate Nicholls, warned the levy could deter domestic visitors and burden businesses already facing a 20% VAT rate. Nicholls told BBC Politics London the measure would disproportionately affect British families and workers traveling to the capital, calling it a "tax on a tax" that risks "taxing the London economy out of jobs, growth, and investment."
"Overseas visitors are incredibly important to central London, but this will hit British consumers hardest-builders, conference attendees, families. It's a regressive step."
Kate Nicholls, Chair, UK Hospitality
Conversely, Westminster Council leader Adam Hug, whose borough hosts landmarks like Big Ben and Buckingham Palace, emphasized the levy's potential to offset costs borne by local taxpayers. Westminster's daytime population swells to over 1 million-five times its nighttime residency-straining infrastructure funded largely by council tax. Hug described the levy as a "long-overdue" tool to "redress the balance" and fund local initiatives.
"Our residents effectively subsidize services for millions of daily visitors. A modest levy would provide critical revenue without discouraging tourism."
Adam Hug, Leader, Westminster Council
Southwark and Brent councils have also advocated for the measure, framing it as a way to bolster local economies amid broader financial pressures.
Flexibility and economic upside
The Centre for Cities briefing highlighted flexibility as a key advantage, noting that Toronto recently raised its levy ahead of the 2026 World Cup. Andrew Carter, the thinktank's CEO, urged London to adopt Scotland's percentage-based model, which allows rates to fluctuate with demand. He stressed that revenues should remain under local control-split between City Hall and boroughs-rather than being earmarked by central government.
"A tourist levy could accelerate London's growth if revenues stay local. This should be the first step in a broader devolution of fiscal powers to the capital."
Andrew Carter, CEO, Centre for Cities
Next steps and political timeline
The mayor's office declined to comment on "speculation" but reaffirmed Khan's stance that a "modest" levy-comparable to those in peer cities-would strengthen London's global appeal. The Ministry of Housing, Communities and Local Government noted that existing frameworks, like Accommodation Business Improvement Districts (ABIDs), already permit localized levies; Richmond Council is exploring an ABID for attractions such as Hampton Court Palace.
While Reeves is widely expected to formalize the devolution measure in coming months, no timeline has been confirmed. Should a London-wide levy proceed, it would likely supersede local schemes like Richmond's proposed ABID.
Key figures at a glance
- £240m: Estimated annual revenue from a 5% levy in London.
- 89m: Overnight stays in London (2024).
- £493m: New York City's annual levy revenue (14.86% rate).
- £1.30: Nightly fee in Wales from 2026.
