Councils able to impose tourist taxes on staycationers under Government plans

Local authorities in England would be given the power to levy a tax on staycation tourists under plans being considered by the Government.

English local authorities have no powers to raise a tourism tax , though a visitor levy is implemented by some areas using a legal workaround. The Scottish government introduced tourism tax powers this year and the Welsh government has similar plans.

Devolved mayors have been pushing for the measures to be introduced in the Government's devolution white paper, the Telegraph understands, with one figure involved in the process describing it as "when, not if".

A source familiar with the plans told The Telegraph: "Individual ministers are in favour, though there is resistance coming from the Treasury."

It would mean councils would be able to apply levies onto hotel bills and BnB stays, most likely by £1 to £2 per person.

The white paper is being put together by Angela Rayner and her Ministry of Housing, Communities and Local Government. The department did not rule out the plans when asked by The Telegraph.

The previous Conservative government ruled out establishing tourism tax powers for local authorities in 2023.

Because any such tax would likely fall on domestic tourists as well as foreigners, it could be interpreted as a tax on working people .

The powers could be given to all of England's 173 local authorities as well as the large combined authorities controlled by elected mayors.

Those in favour see a tourism tax as the first step on the road to full fiscal devolution , where mayors can levy their own local taxes and handle their own budgets.

"Every time we meet with a minister, or secretary of state, we raise it," said a mayoral source, "it's guilt free because they don't live here."

Another characterises it as a way for devolved authorities to "dip our toe into the water of raising our own taxes".

Advocates of the tax tout an Institute for Fiscal Studies report from 2019 which estimated that a £1 per head tourism levy, if introduced in England, could instantly raise revenue of £420 million.

The report was co-authored by Neil Amin-Smith, now serving as one of Chancellor Rachel Reeves' top special advisors.

Research by the Northern Powerhouse Partnership calculated that a £1 per head levy would raise £428 million a year.

Local authorities currently rely largely on funding settlements from central government. Mayors have the power to raise extra revenue through the precept, a small levy on top of council tax which can be used to fund devolved projects.

While any such levy would raise more money in tourism hot spots, advocates are pushing for a process of equalisation in which revenue raised will be distributed into less prosperous surrounding areas.

In London, for example, funds raised by a tourism tax in the centre of the city could be "equalised" by distributed spending on less prosperous outer boroughs.

A number of European countries impose a tourist levy in popular destinations, including Italy, Greece and Germany.

A small charge resembling a tourist levy is already imposed in parts of England due to a legal workaround.

In Greater Manchester and Merseyside, firms in areas designated as a Business Improvement District for tourism raise a levy by charging visitors per person per night on top of the price of their accommodation.

Tourism BIDs have also been established in Dorset, Blackpool, Great Yarmouth, Moray, the Tweed Valley and Loch Ness.

There has also been a push for tourist levies by local authorities in London, Devon and Cornwall.

Earlier this year the Scottish parliament voted in favour of a tourist levy. The Visitor Levy (Scotland) Act allows local authorities in Scotland to charge a levy on short-stay accommodation.

Edinburgh City Council is already at work on a levy which is expected to come into force in 2026.

The Welsh Labour government has said it plans to introduce a tourist tax bill in the Senedd by the end of the year.