Travellers booking holidays abroad are increasingly familiar with surprise extra charges at check-out, from 'city levies' to 'eco-fees'. Now, a significant new report suggests a similar tourist tax for London could generate a substantial windfall for the capital, far exceeding earlier estimates.
Revised Forecasts Reveal Higher Revenue Potential
Fresh analysis indicates that a charge on overnight visitors to London could raise more than £350 million every year. This figure is considerably higher than previous forecasts, which had projected an annual income of around £240 million.
The latest calculation comes from Central London Forward (CLF), a group representing 12 central London boroughs. According to their model, reported by the BBC, a three per cent levy on the cost of a hotel room or short-term rental would be applied.
This move follows the granting of powers to Mayor of London Sir Sadiq Khan last year. He has stated that such a tax would directly support the city's economy and bolster its status as a premier global destination for tourism and business.
How the Tourist Levy Would Work and Who Pays
The proposed system, enabled by changes in the Autumn Budget 2025, would allow city mayors and local officials across England to implement a small fee for overnight accommodation. This would cover stays in hotels, B&Bs, guesthouses, and holiday lets.
This policy would bring England in line with the rest of the UK and major international cities like New York, Paris, and Milan, where such charges are standard practice.
The CLF analysis breaks down the projected revenue: the 12 central boroughs alone would generate approximately £275 million. The remaining London authorities would contribute an estimated £77 million, bringing the total to over £350 million.
Calls for Fair Funding and Local Benefits
The potential scale of this income has sparked immediate discussion about how it should be distributed. Boroughs in central London are already calling to retain half of the additional funds raised in their areas. They argue this is necessary to offset the increased pressure tourism places on local services like waste management.
Projections show Westminster could raise over £95 million independently, with Camden, Kensington and Chelsea, and Tower Hamlets each forecast to bring in more than £20 million annually.
However, it remains undecided how the revenue would be split between City Hall and local authorities. In November, Lambeth Council advocated for a London-wide 'Overnight Visitor Levy', describing it as a 'fair and progressive' tool for sustainable tourism. They suggested a modest charge on accommodation costs.
The plans draw inspiration from other UK cities. Manchester and Liverpool are piloting schemes with charges of £1 to £2 per night, while Edinburgh is set to introduce a five per cent levy from July 2026, expected to raise £50 million a year.
While recognising tourism as a vital economic force, supporters argue a targeted tax ensures local communities and services receive a fair return from the visitor economy, helping to manage its impact sustainably for the future.
