Chancellor Rachel Reeves’ bid to fix Britain’s finances could result in holidaymakers paying a hotel tax.
Officials at the Treasury are believed to have looked at the possible impact of bringing in a tourist tax similar to those applied in holiday hotspots on the continent, where guests can be charged extra per night for accommodation.
The Welsh government has already announced plans for a visitor levy from 2027 which could see people pay £1.25 per night for hotels, B&Bs and guesthouses or 75p fro campsites and hostels.
A tourist tax in Edinburgh for visitors to the Scottish capital will be set at 5% of the cost of accommodation which the local council hopes will raise about £50million per year. Councillors in the city will vote on the proposals which if passed will take effect from July 2026.
But Kate Nicholls, chief executive of UK Hospitality, said a tourist tax would do untold damage to Britain’s tourism industry.
She told Express.co.uk: “The UK remains one of the biggest visitor destinations in the world, but the number of inbound visitors hasn’t yet returned to pre-pandemic levels.
“As well as dealing with other economic shocks over the past four years, our hospitality sector is still recovering and we should not be considering charging visitors, foreign or domestic, an additional tax.”
She went onto say that the UK already performs poorly when it comes to global tourism.
Ms Nicholls said: “The UK already ranks poorly in its competitiveness on the global tourism stage, with our high rate of VAT, and the introduction of a tourist tax would only damage that further.”
She added: “Hospitality businesses are already burdened with increasing costs in every part of their operations, with an additional £3.4billion in employment costs and business rates hitting in April, so further taxes on the sector would be extremely damaging to the sector.”
Kate Allen, owner of luxury holiday company Finest Stays, told Express.co.uk that such a move would be nothing short of “outrageous”.
She said: “Introducing a ‘tourist tax’ would be an outrageous move and an absolute travesty for Britain’s tourism industry, which is already under immense pressure from recent changes to FHL (furnished holiday lettings) tax legislation and increased HMRC reporting demands.
“At a time when the industry is striving to recover and remain competitive, adding further costs for holidaymakers risks deterring visitors and causing irreparable harm to a vital sector of the economy. The Chancellor must look elsewhere to balance the books.”
Hotelier, Sir Rocco Forte, warned an extra tax would damage Britain’s tourist industry. He said travel and tourism is a vital part of the UK economy, contributing more than £250billion annually to UK economic growth and supporting 3.5 million jobs.
Mr Forte added that apart from the very smallest businesses, everyone trying to make a living in this area is being hit by the Government’s increase in employers’ National Insurance and the whole industry is suffering from the refusal to restore tax-free shopping for tourists.
The Government has also “hit” tourism by raising the levy on air travel, leading Mr Forte to add: “It beggars belief a new tourist levy could be imposed on top of that.”
He said: “This would be a pernicious new tax charged on top of all other taxes. The UK is already not a cheap destination and this can only deter cost-conscious visitors who will increasingly choose to go elsewhere.”
The prominent UK businessman warned visitors would likely spend less while in Britain because their accommodation would be more expensive, impacting the entire tourism economy, including eateries, tourist attractions and retailers.
Mr Forte claimed while other countries ring fence the money raised from tourism taxes, the Labour Government will “doubtless” use the money to plug the black hole it has created in the public finances.
A Treasury spokesperson said: “We do not comment on tax speculation outside of fiscal events.”
Meanwhile, a Treasury source said no one should be under any doubt that meeting the fiscal rules is non-negotiable and the Government will have an “iron grip” on the public finances.
They said the Chancellor has been clear she will not repeat the October Budget and has asked the Office for Budget Responsibility to produce an economic and fiscal forecast on March 26 which will provide a clear assessment of performance against the fiscal rules.
The source added: “We will not give a running commentary. Difficult decisions have already been taken on spending and the Spending Review in June will root out waste in public spending and ensure taxpayer money is focused on the Prime Minister’s Plan for Change.
“This includes boosting growth to put more money in working people’s pockets. The Chancellor keeps all taxes under review and makes tax decisions at fiscal events.”
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