Government’s new tax on overnight stays risks burdening rural tourism
Find out more about the proposed overnight visitor levy in England – a tax that could place further pressure on small rural businesses that rely on visitors, investment and seasonal trade
The UK Government has confirmed it will introduce an overnight visitor levy in England. Local leaders will have the power to tax overnight stays, and subject to legislation, they could start developing schemes from 2028.
Even if it does not have a mayor, your local area could still have an overnight visitor levy implemented. We have learnt from the government that non-mayoral combined authorities or county combined authorities – known in the jargon as ‘foundation strategic authorities’ – will also have the power to bring this in.
What will the overnight visitor levy mean for your business?
The CLA opposes the levy in principle. Rural tourism businesses do not need another tax. They need more visitors, more investment and a fairer operating environment.
Tourism plays a crucial role in supporting the rural economy. Many farm businesses, for example, depend on holiday accommodation as an additional income stream, especially as farming incomes grow more volatile. Domestic overnight visitors took 105.6m trips in 2024 and spent £32.9bn, while international visitors spent a further £32.5bn across the UK. A significant part of these trips and spend is in our countryside.
The government has decided the levy will be charged as a percentage of accommodation costs, with providers responsible for collecting and paying it, and has rejected a national cap, leaving the rate to local leaders. The CLA has strongly opposed this approach, warning it will add to the administrative burden on small rural businesses, where prices already vary by season and booking platform. Additionally, an uncapped rate leaves no ceiling on how high future levies could climb.
The value of overnight stays to rural businesses
The UK is already a high-tax destination for tourism. A typical overnight stay carries around £25.33 in taxes, compared with £17.77 in comparable destinations overseas. That's why the CLA is calling on the Treasury to cut VAT on hospitality and tourism from 20% to 10%, bringing the UK into line with its competitors, and helping unlock growth in the visitor economy.
Overnight visitors are particularly valuable to rural businesses. VisitBritain data shows that domestic visitors staying in self-catering accommodation spend almost eight times more per trip than day visitors (£415 compared with £53).
The government may be going ahead with the levy, but the CLA will keep pressing the Treasury for a VAT cut and making the case that tourism growth comes from competitiveness, not higher taxes. Crucially, the levy will not apply automatically across England.
Strategic authorities will first need to consult on proposals, including the levy rate, expected revenues and how the money raised would be spent.