Tourist tax bombshell threatens Britain’s struggling hospitality businesses

Another 5% on your holiday as small hotels fear the worst

If Premier Inn says England’s new tourist tax risks doing “irreparable harm”, what chance does the family-run B&B down the road have? Ministers are facing a growing hospitality backlash over plans to let mayors impose a levy on overnight stays. For small hotels, guesthouses and B&Bs already battling business rates, wages, energy bills and fragile consumer confidence, it looks like yet another cost they cannot absorb.

TOURIST TAX BACKLASH

If big chains say a tourist tax will cause “irreparable harm”, what does that mean for small hospitality businesses?

Ministers are facing a growing backlash from the hospitality industry after announcing sweeping new powers that will allow mayors in England to impose a tourist tax on hotels, B&Bs, guesthouses and Airbnbs with no cap on how much they can charge and few restrictions on how the money is spent.

Angela Rayner, the local government secretary, says the levy will help fund local services, public spaces and attractions. For thousands of small and micro hospitality businesses, the reaction is far from welcoming and amounts to another cost, barrier to recovery, and a hit to already fragile margins.

Hammer Blow

UKHospitality says a 5% overnight levy across England could mean 33,000 job losses and a £2bn hit to the economy

Premier Inn called the move “hugely damaging”, warning of irreparable harm to a sector already battling rising costs and falling consumer confidence.

Small operators are trying to stay alive and are saying they now feel they’re being strangled.

If large chains with national marketing budgets and deep reserves are worried, imagine the pressure on family‑run B&Bs, independent hotels and micro‑hospitality businesses like rural guesthouses. 5% on top of the customer’s bill may not sound like much but when demand is already constrained by the cost of living the reality is serious. These businesses don’t have buffers or scale and they feel every shock immediately.

Local Funding, Local Control

The Government argues the levy will raise money for local services and support public spaces and attractions. That will be true if the number of visitors doesn’t fall. It could give mayors a flexible revenue stream and it is happening all around the world.

Every Labour metro mayor has agreed to cap the levy at 5%, at least initially. Mayors say cities like New York, Paris and Amsterdam have long used visitor levies without damaging tourism. However, small businesses say that our hospitality sector is already under unbearable strain and international comparisons ignore the UK’s higher business rates, energy costs and staffing pressures.

The Patchwork

Not all areas will adopt the tax. Labour mayors are likely to introduce a levy. Reform UK and Conservative mayors (east coast) are refusing to impose it. In Scotland, Edinburgh already charges 5% and in Wales councils can charge £1.30 per night from 2027

This creates postcode competition which is a major concern for small hospitality businesses which rely on price‑sensitive domestic tourism. A family choosing between two coastal towns may simply pick the one without the levy.

Survival

The sector is still recovering from:

• pandemic losses

• inflation shocks

• staffing shortages

• energy volatility

• falling consumer confidence

A tourist tax may help councils but it risks pushing small hospitality businesses past breaking point.

When big chains warn of “irreparable harm”, small operators think: If they’re worried, we should be terrified.

Hobson’s Choice

Tourist taxes are common globally, but England’s hospitality sector is entering this moment already weakened and costs of doing business in the sector have soared.

Mayors see a new revenue stream. Councils see investment potential. Small and micro hospitality businesses see another cost they can’t absorb and have no choice but to pass on to customers who can’t afford to pay up.

If the government wants thriving high streets, vibrant coastal towns, and resilient visitor economies, it must design this levy with small businesses at the centre, not as an afterthought. When hospitality hurts, local economies hurt, and when small hospitality businesses close, communities lose far more than a place to stay.