London edging closer to tourist levy as mayor signals cautious support

London could soon join other major global cities in charging visitors for overnight stays, as Chancellor Rachel Reeves prepares to hand new devolved powers to City Hall under forthcoming legislation.

Sir Sadiq Khan has “cautiously welcomed” reports that the English Devolution and Community Empowerment Bill — currently progressing through Parliament — will give him and other local leaders authority to introduce a tourist levy. The mayor has long argued for such powers, with earlier estimates suggesting a London-wide tax could raise up to £240 million annually. In 2024, the capital recorded 89 million overnight stays, BBC writes. 

England remains the only G7 country where national government blocks mayors or councils from implementing such levies. Scotland and Wales have already moved ahead: Scottish councils can set percentage-based charges, while Welsh authorities will apply a £1.30 nightly rate from 2026.

The Greater London Authority recently commissioned the Centre for Cities think tank to examine potential areas for deeper devolution. Its briefing assessed systems in primary cities across the G7, noting three dominant models: percentage-based charges (New York, Toronto), flat fees (Tokyo), and variable rates linked to location and hotel category (France, Italy).

New York City raises around £493 million annually with an average nightly charge of £14.86. Tokyo, despite far higher visitor numbers, collects just £35 million through a flat fee. For London, the report suggests that either a percentage rate or flat charge would be most practical, as the UK lacks a statutory hotel “star rating” system like those in France or Italy.

Previous GLA analysis from 2017 indicated that a £1-per-night levy could raise £91m, while a 5% tax could yield £240 million. The think tank concluded that London is “unlikely to see a significant drop in visitors” if it adopts a rate comparable to other major cities, citing research showing that tourists are less price-sensitive in top destinations.

It also argued that a levy could support London’s economic growth, infrastructure and business environment — particularly if the mayor controls the rate and how revenues are spent. Toronto, for example, increased its levy ahead of the 2026 World Cup.

“The model the government should adopt is already under way in Scotland,” said Andrew Carter, Centre for Cities chief executive. He noted that the Scottish approach is “flexible” and allows the rate to “rise and fall depending on the demand for overnight stays”.

But the hospitality sector has reacted angrily. Kate Nicholls, chair of UK Hospitality, called the idea “shocking”, warning that the tax would hit domestic visitors hardest.

“This will have a really big impact on British consumers, it's a tax on hardworking British families having a short break in London and it will deter visitors from coming in,” she said. With VAT already at 20%, she added, “it's a tax on a tax”.

Several London boroughs, however, back the idea. Westminster Council leader Adam Hug said the measure would help address the imbalance between the area’s million-strong daytime population and its 200,000 residents.

“So something through an overnight stay levy that helps redress that balance would be enormously welcome,” he said.

The mayor’s office reiterated that “a modest tourist levy” could “boost our economy” but declined to comment further, citing ongoing speculation. A formal announcement is expected in the coming months.

By Sabina Mammadli