UKHospitality has warned that a government move to consult on a holiday tax in England could raise costs for domestic travellers and add pressure to the cost of living.
The organisation said the shift represented a reversal of earlier assurances that ministers had no plans to introduce a visitor levy.
Analysis by the industry body suggests a levy set at 5%, in line with the visitor tax adopted in Edinburgh, could leave domestic tourists facing up to £518m in additional costs once VAT is included.
According to VisitBritain, people in Britain took more than 89 million overnight trips in England in 2024, spending 255 million nights away from home.
UKHospitality said the measure would increase costs for accommodation providers and likely be passed directly to consumers.
It added that a levy at the level modelled would be equivalent to an effective VAT rate of 27% on holiday accommodation in England.
The organisation also highlighted the contrast with other European destinations, noting that the change could leave visitors to England paying double the rate applied in Paris and substantially more than in Barcelona or Rome.
Kate Nicholls, UKHospitality chair, said: “The government has gone back on its word and introduced a damaging holiday tax. This is the wrong way to make policy and the fastest way to undermine investment.
“This is a shocking U-turn that will only make life more expensive for working people. It could cost the public up to £518m in additional tax when they travel in the UK and have knock-on impacts for the wider hospitality sector.”
She added: “It will effectively increase the rate of VAT to 27% for people who want to enjoy a holiday in the UK – making it one of the highest tax rates for consumers in Europe. Make no mistake, this cost will be passed directly onto consumers, drive inflation and undermine the government’s aim to reduce the cost of living.
“It’s important that the government has paused to consult. We will be working hard with the chancellor’s team to highlight the damage this will do to the cost of living.”
