Kinbrook Group responds to visitor levy proposals and their potential impact on England's hospitality sector

The publication of the government’s consultation response outlines decisions on the design and implementation of the levy, including how revenues could be used, the types of accommodation that may be included, how rates might be calculated and the administrative framework that could sit behind the scheme.

The proposed legislation needs to be passed before local leaders can exercise these new powers. The government’s consultation response outlines the next steps towards introduction, but individual local leaders will ultimately determine whether a levy is appropriate for their area and how any revenue raised would be invested.

The government expects mayors and Foundation Strategic Authority leaders to set out plans for how revenues would be spent by early 2028. Businesses would therefore have time to prepare, although the timing of any levy will ultimately depend on legislation and decisions taken locally.

Supporters argue that visitor levies are commonplace internationally and can provide a valuable source of funding for local infrastructure, transport improvements, cultural attractions and tourism initiatives. Similar schemes already operate in cities across Europe, and in Scotland, with the local authority introducing a 5% charge this summer in Edinburgh, as the first Scottish local authority to implement a levy.

The government has indicated that any charge would be calculated as a percentage of accommodation costs rather than as a flat nightly fee. Ministers argue this approach would help protect lower-cost and budget accommodation while giving local leaders greater flexibility over how levies are designed and applied.

Accommodation providers should also be aware of the potential VAT implications. Subject to the final legislation and HMRC guidance, VAT may be payable on the accommodation charge inclusive of the visitor levy. If so, the total cost to guests could increase by more than the headline levy itself, creating an additional pricing and profitability consideration for businesses.

One of the key concerns raised by industry bodies is the potential effect on the affordability of domestic tourism.

At a time when many households remain sensitive to rising costs, even relatively modest additional charges could influence how visitors compare destinations and accommodation options. Hospitality leaders have argued that England already faces competitive pressures from higher VAT rates and increasing operating costs, and that further charges risk reducing visitor spending or discouraging some overnight stays altogether.

Experience from overseas suggests many tourists are willing to pay visitor levies where the charges are transparent and revenues are visibly invested back into destinations. The effect is therefore likely to vary between locations, accommodation types and visitor demographics.

Businesses need to consider how additional costs fit within their wider pricing strategy and whether changes in customer behaviour could affect occupancy levels, average room rates or seasonal demand.

A visitor levy has the potential to affect multiple aspects of an accommodation business, from pricing and marketing through to customer experience, cashflow and investment decisions. For some operators, the administrative burden may prove just as significant as the financial impact.

While the levy would initially be introduced as a policy change, its implications could extend far beyond compliance. Businesses may need to review pricing strategies, booking processes, customer communications and operational planning to ensure they remain competitive and profitable if additional charges are introduced.

The impact is also unlikely to be felt evenly across the sector. Independent hotels, holiday parks, guesthouses and self-catering providers may face different challenges depending on their customer base, location and pricing model. For South West destinations that rely heavily on tourism, understanding how visitors respond to any additional costs will be particularly important.

Those businesses that consider pricing, profitability, customer communications and operational processes together are likely to be in a stronger position to adapt as the policy develops.

The government’s consultation response also highlights that administration and compliance will form an important part of any future levy framework. Accommodation providers are likely to play a key role in collecting and administering charges, creating additional reporting and operational requirements.

While the details are still emerging, many businesses may need to review booking systems, accounting procedures, payment processes and customer communications so they are ready to manage any new obligations efficiently.

There is also the possibility that mayoral authorities could adopt different approaches in different parts of the country, increasing complexity for businesses operating across multiple regions.

While there is no immediate action required, waiting for legislation to be finalised may mean businesses miss opportunities to prepare.

Hospitality operators should monitor the progress of legislation, follow announcements from local mayoral authorities and assess how potential levies could affect pricing structures, visitor behaviour and operational processes.

Importantly, they should also consider how any locally generated revenues could benefit their destination. If funds are reinvested effectively into transport, public spaces, cultural facilities and tourism promotion, some businesses may ultimately benefit from improvements that help attract more visitors over the long term.

The publication of the consultation response provides the clearest indication yet that the government intends to move forward with visitor levy powers for mayors. While many details still need to be finalised, and implementation is dependent on legislation, hospitality businesses now have greater clarity about the direction of policy.

For accommodation providers, the challenge will be understanding not only the direct financial implications, including potential VAT consequences, but also the wider operational and commercial effects. As part of Kinbrook Group, Old Mill believes the strongest responses come from businesses that take a joined-up view of change, linking policy developments with customer experience, profitability and long-term growth.

Starting to consider the potential implications now will give businesses more time to assess their options as the legislation and local proposals develop.

Policy changes rarely affect just one part of a business. Through Old Mill and the wider Kinbrook Group, we help hospitality businesses take a joined-up view of tax, finance, operations and growth. To discuss how the proposed visitor levy could affect your business, speak to Laura Seaward or contact your usual Old Mill adviser.