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      Autumn Budget 2025 outlined that there would be devolved powers for Mayoral Strategic Authorities in England to create local Overnight Visitor Levies, chargeable on short-term accommodation in each of the relevant cities. This is further to similar Overnight Visitor Levies that have already been announced in certain cities in Wales and Scotland.

      There is also a consultation document with further detail on how the proposed levy would operate and interested parties can respond to the consultation by 18 February 2026.

      The consultation document anticipates that a wide range of commercially let short-term accommodation will be within scope of the levy, subject to local decisions on the scheme. The types of accommodation that could be subject to a levy include, but are not limited to:

      • Hotels;
      • Bed and breakfasts;
      • Guesthouses;
      • Hostels;
      • Campsites and caravan parks;
      • Self-catering properties;
      • Serviced apartments and aparthotels;
      • University halls or student accommodation let commercially during holidays; and
      • Accommodation in a vehicle, or on board a vessel, which is permanently or predominantly situated in one place.

      Mayors and other local leaders are expected to have discretion to apply locally determined exemptions or reliefs (e.g. certain types of accommodation, after a certain number of stays, or for certain types of individuals). Some national exemptions may be applied – such as for charitable or non-profit accommodation provided for shelter.

      Whether there should be a minimum threshold above which providers become liable for the levy is currently under consideration.

      The rate structure will either be a percentage of accommodation cost or a flat rate charge (either per person or per room, per night), but this is currently being determined. The Government proposes that local leaders should set levy rates within their areas, potentially within certain limits, subject to consultation responses.

      The accommodation providers (rather than the end customer) would be liable for the local levy and will need to decide whether to pass on the levy costs to customers as part of the VATable cost of accommodation – this would also increase the VAT due.

      The levy is expected to be charged on the date of arrival, rather than the date of booking or payment.

      The levy will be a self-assessed tax, where taxpayers must register with the relevant authority, keep records of transactions in scope, and submit returns, as appropriate. There are expected to be civil powers to charge interest and penalties and to recover unpaid tax where a visitor accommodation provider fails to meet its statutory obligations.

      Comment

      We consider it is important that a simple and consistent approach across each local authority is applied to limit the administrative burden on businesses.

      We will monitor how this progresses and identify any key differences between each Overnight Visitor Levy. Cities in Scotland that have already started introducing an Overnight Visitor Levy have had some potential differences with its implementation demonstrating the complexities. For example, in Edinburgh, the levy is only applicable for a maximum of five consecutive nights, whereas in Glasgow the levy appears to apply for the entire stay of accommodation.

      There are various city taxes already in operation globally on short-term accommodation and we have seen practical issues and complexities that are likely to arise, e.g. there can be significant confusion about who has the levy reporting obligations where short-term accommodation has been sold by travel agents or tour operators.

      The Overnight Visitor Levy will create additional administration for accommodation providers, and this should be monitored as further information is made available once the response to the consultation by HMRC is provided.

      For further information please contact:

      Our tax insights

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