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Cash-strapped local councils are considering levying a tourist tax on holiday lets, hotels, and other short-stay accommodation as a new funding source.
The councils follow the lead of cities with strong tourist economies in Spain, Germany, Belgium, France and Canada.
A tourist tax—sometimes called a ‘transient visitor levy’—is a fee paid by visitors for using a room or bed each night of their stay.
The charge is generally a fixed rate or a percentage of the room cost but can be variable, with higher charges for peak-period stays. Children and visitors travelling for health reasons often have a discounted rate.
Rates may also vary with the type of accommodation; for example, guests at hotels with higher star ratings sometimes pay more.
The law only allows local councils to levy a tourist tax in England if new legislation is introduced at Westminster.
However, Manchester and Liverpool are testing a workaround that will raise extra business rates - a BID or Business Improvement District. If local businesses vote to form a BID, a management board sets how much the business must pay in additional rates. The tourist towns Blackpool and Great Yarmouth also have BIDS.
Manchester’s BID collected £2.8 million in their first year, and Liverpool’s raked in £939,000.
The Welsh Government is also proposing a tourist tax, while Scotland already has the legislation in place but has yet to set a start date.
The Institute for Fiscal Studies calculates that a £1 a night tourist tax in England would raise £420 million a year, directly going into council coffers to spend on local services. This compares with council tax and business rates, which raise around £55 billion annually.
Wales seems set to launch the first proper working UK tourist tax.
Senedd finance secretary Mark Drakeford says the Visitor Accommodation (Register and Levy) Bill Etc. (Wales) will allow councils to levy a tourist tax, asking tourists to pay a ‘fair and reasonable charge towards the costs of tourism’.
Accommodation providers will collect the tourist tax for their council.
If the bill becomes law, accommodation providers are expected to sign up to a national register in 2026 or face a fine, with levies starting in 2027.
“This Bill is rooted in the principle of fairness. Tourism makes an important contribution to the Welsh economy and life. We want to ensure its long-term sustainability,” said Drakeford.
“That’s why we believe it is fair visitors contribute towards local facilities, helping to fund infrastructure and services integral to their experience. Visitor levies are common around the world, benefiting local communities, tourists and businesses – and we want the same for Wales.”
Tourist taxes are charged by many European cities that are popular with tourists.