The Chancellor’s plan to give local authorities in England the power to levy a tourist or overnight stay tax on hotels and short-term rentals (STRs) is set to become one of the most significant changes to the UK visitor economy in recent years.
Tourist taxes are already common in Europe, and similar schemes have recently been enacted through devolved governments in Wales and Scotland. (Please refer to the Appendix which summarises how and where the different levies currently applied in cities across the UK.) However, unlike these destinations, English hospitality businesses operate under some of the highest VAT and business-rate burdens in Europe. This structural difference has made operators particularly concerned that a tourist tax in England would create a competitive disadvantage compared to European markets such as Paris, Amsterdam, or Barcelona, where the baseline tax environment is more favourable.
The idea of an English tourism levy has been circulating since late 2024, when councils began pushing for greater fiscal devolution. Momentum accelerated with the introduction of the English Devolution and Community Empowerment Bill (the Bill) in July 2025. The Bill requires the Government to conduct a review and produce a report on how councils could be empowered to introduce a levy that contributes to local general funds, effectively paving the way for a tourist tax in England.
However, Manchester and Liverpool have already implemented levy-style arrangements without any national legislation, relying instead on Accommodation Business Improvement Districts (ABIDs). These ABIDs demonstrate how nightly visitor charges can be introduced through local governance structures, providing a useful case study for what may follow if the new powers are granted.
How do Manchester and Liverpool currently apply a levy?
Manchester and Liverpool have already implemented levy-style arrangements without any national legislation, relying instead on Accommodation Business Improvement Districts (ABIDs). ABIDs are special types of Business Improvement Districts (BID) that focus specifically on the accommodation sector, including hotels and STRs. These ABIDs demonstrate how nightly visitor charges can be introduced through local governance structures, providing a useful case study for what may follow if the new powers are granted.
ABIDs must be approved through a formal ballot of eligible accommodation businesses. Once approved, they allow operators to raise funds collectively to invest in initiatives that support the visitor economy, such as marketing, major events and improvements to visitor infrastructure. The arrangements provide hospitality businesses with a voice on how the funds are spent, and revenues are ring-fenced specifically for projects that support tourism.
Manchester’s ABID
Manchester introduced its ABID after a ballot in which eligible accommodation businesses voted in favour at a ratio of 4:1. As a result, the City Visitor Charge of £1 per room or unit per night came into effect on 1 April 2023. The legal liability for paying the levy falls on the business ratepayer, usually a hotel, serviced apartment operator, or STR provider. In practice, most operators pass this cost onto guests as a clearly itemised surcharge.
Funds raised are reinvested into Manchester’s visitor economy, supporting services such as destination marketing, event bidding, and improvements in the overall tourist experience. The model is presented as a collaboration between local authorities and hospitality providers to fund local tourism growth without relying on central government support.
Liverpool’s ABID
Liverpool established its ABID in January 2023 after 84% of eligible businesses voted in favour of a £1 per night charge, later rising to £2 following a further ballot in April 2025. As in Manchester, liability rests with the operator, though the cost is commonly transferred to the guest.
The Liverpool BID Company manages the funds, which are allocated to marketing, events, and projects aligned with the ABID’s business plan. However, the Liverpool scheme has faced organised opposition from a group of hospitality operators who argue the levy is unfair and was introduced without proper consultation. These operators claim the most recent ballot contained procedural irregularities and have called for the Government to void the result. Despite this dispute, the Liverpool levy remains in place and continues to serve as an example of how ABID-driven visitor charges can be implemented quickly and independently of national legislation.
Consultation and legislative process pursuant to the Bill
If the Bill becomes law, it will give local authorities the statutory power to introduce an overnight stay levy. Supporters argue this is a natural extension of fiscal devolution; opponents contend it is unfair, especially at a time when hospitality businesses are already under intense financial pressure.
Under the Bill, ‘established mayoral strategic authorities’, primarily combined authorities with a directly elected mayor, would be permitted to create and administer a levy. The Secretary of State must publish a review within 12 months of the Act’s passage, including options for how such levies might work and the degree of autonomy councils should have over their design and operation.
Once enacted, the likely process for implementing the levy would involve:
- Designing the levy
Each authority would decide the rate (flat nightly fee, per-person fee, or a percentage of the booking cost), the types of accommodation included, and the administrative mechanism for collection.
- Consulting stakeholders
Authorities would be expected to consult local councils, the hospitality sector, and community groups. However, the Bill does not require extensive public consultation, and critics argue this could result in levies being imposed without adequate business input.
- Retaining funds locally
Money raised would remain with the authority introducing the levy. While this is intended to support local infrastructure and tourism investment, there is no statutory guarantee that funds would be ring-fenced for visitor-related spending.
The impact on hospitality businesses
For hospitality businesses, the introduction of a levy could create significant operational challenges. Energy bills, staffing costs, insurance, maintenance, double Council Tax or business rates, and ongoing inflationary pressures are already squeezing margins. A levy adds a further cost (which could either absorbed by the operator or passed on to guests), risking reduced competitiveness and suppressed demand, especially among domestic travellers sensitive to rising costs.
There are also concerns that local political pressures may lead to inconsistent, unpredictable levy structures across the country. Without national standardisation, businesses could face multiple competing systems, each with different thresholds, exemptions, and reporting requirements.
The proposed tourist levy represents a shift in how tourism is funded and how local authorities interact with the hospitality sector. Unlike a national tax set uniformly across regions, devolved powers would result in a patchwork of local levy systems. Councils could choose:
- a flat per-night fee
- a per-person charge
- a percentage-based levy on the total room rate
- varying exemptions (e.g., long stays, specific property types)
- local caps and alternative collection mechanisms
Pending national legislation, other local authorities in major tourist areas may follow Manchester and Liverpool’s ABID route rather than waiting for the statutory framework.
A formal consultation is expected within the next nine months. Operators should engage with this consultation, ideally through bodies such as ASAP, to advocate for a uniform, predictable national approach. Without this, businesses face the risk of multiple overlapping levies, increased administrative burdens, and higher compliance costs.
If you have questions or concerns about these proposals, please contact Nadia Milligan.