Tourist tax on the cards for holiday let operators

The STAA and PASC have described the pending tourist tax – announced in this week's UK Budget – as 'the last thing' short-term rental operators need.

Ben Spier, Head of Regulation at Sykes Holiday Cottages and Board Member at STAA, said: "This levy will not just be felt by families already managing rising household costs. It threatens to deter people from choosing holidays in the UK, which would be a serious blow for the many communities that rely heavily on spending from overnight visitors."

Meanwhile, this week's PASC newsletter included this line about the tourist tax: "This is the last thing that the accommodation sector needs right now. The government appears to be wilting under mayoral pressure for tax raising powers. We are already taxed out and such a measure will not help growth, investment, or jobs."

The new reality for short-term rentals

In her budget announcement, Chancellor Rachel Reeves announced the expansion of power for mayoralties to impose fees on all types of short-term accommodation.

In the past, some local authorities attempting to levy charges often did so through business fees, which meant many short-term rentals and private Airbnbs sometimes slipped through the net. The government's new rules are designed to close this loophole, bringing England into line with many other countries.

This means that if your city's mayor decides to implement a tourist tax, your short-term rental property – regardless of the platform or structure you operate under – will likely be included.

Why the change? And how much could a tourist tax raise?

The government’s rationale is simple: giving local leaders the tools to fund their own priorities. Housing Secretary Steve Reed said the policy would allow mayors to “put more money into local priorities, so they can keep driving growth and investing in these communities.”

The revenue potential is substantial. Data from the Office for National Statistics suggests a simple £1-per-night tax applied only to international visitors could collectively raise nearly £250 million annually across England.

Unsurprisingly, this has generated mixed reactions from city leaders:

• Support: London Mayor, Sadiq Khan, and the Mayor of Manchester, Andy Burnham, have welcomed the change, seeing it as a way to support local economies and sustain growth.

  
  

• Opposition: Tees Valley’s Lord Houchen, meanwhile, has firmly rejected the idea, stating, "There will be no tourist tax in Teesside, Darlington, and Hartlepool for as long as I’m mayor."

Prepare for inevitability

For hosts, this new power presents both a challenge and a critical opportunity to influence policy.

1. Pricing strategy is key: critics from the hospitality industry argue that introducing a levy could deter international visitors and discourage domestic holidays. As a host, you need to factor this potential new cost into your pricing strategy.

   
   

2. Your chance to be heard: the government has launched a consultation, titled Overnight Visitor Levy, seeking views on the design of the new mayoral power. This consultation is asking for feedback on crucial questions like: what types of accommodation should be included, how levy rates should be calculated (flat fee vs. percentage), and how the money should be used. This consultation closes on 18 February 2026. This is a critical opportunity for hosts to provide evidence and shape the final rules. Click here to take part in the consultation.

   
   

3. Stay hyper-local: this is not a national blanket tax; it is a local power. You must monitor the news and announcements from your specific city mayor and local council. If you are in Manchester, London, or other high-tourism areas, you should be actively seeking updates.

   
   

4. Transparency is mandatory: guests are increasingly used to paying local taxes in popular global destinations. Should your local council introduce a tax, ensure you are transparent about the added cost during the booking process to avoid negative reviews or disputes.

   
   

The implementation of a tourist tax now seems less like an 'if' and more like a 'when' for many major English cities. Hosts who are prepared to adapt their pricing and compliance strategies – and use this opportunity to engage with the consultation – will be the ones who maintain their success in this evolving regulatory landscape.