New Visitor Levy risks piling more pressure on rural tourism businesses

If you run a rural tourism business, you could soon have to collect a new tax from overnight guests.

Following Chancellor John Healey’s confirmation of the policy in this year’s Autumn Budget, the UK Government has published the Visitor Levy Bill. If passed, the bill would give mayors and strategic authorities the power to introduce a levy on overnight stays from 2028, potentially affecting thousands of rural tourism businesses across England.

While visitor levies are already established across much of Europe, as well as Wales and Scotland, the CLA has opposed the proposal from the outset, arguing that tourism businesses are in need of support to invest and grow, not additional taxes and red tape.

In this blog, we explain what the Visitor Levy could mean for rural businesses and CLA members and outline the key proposals that you need to be aware of.

The rate would be determined by the local authority, so not all areas would be subject to a levy. Unlike other tourist taxes elsewhere, the proposed levy would be charged as a percentage of the accommodation price, excluding VAT, rather than a flat fee per night. 10 Labour metro mayors have pledged to introduce a rate of 5%, and the draft legislation does not place a cap on the amount that could be charged. Revenue raised through the levy would be retained locally and used to support local priorities and investment. Importantly, this does not mean it must be ringfenced for tourism.

Responsibility for collecting and accounting for the levy would rest with the accommodation provider. This is defined by the bill as the individual or business that receives the income from the stay and declares that income for tax purposes.

While providers could appoint a third party, such as a booking agent or property management company, to administer the levy on their behalf, legal responsibility would remain with the accommodation provider.

The bill adopts a broad definition of “local visitor accommodation”, meaning a wide range of tourism businesses would be required to charge the levy. Hotels, B&Bs, campsites, holiday cottages, caravan sites and even vessels such as permanently moored boats would all fall within its scope.

The bill also includes a potential exemption for smaller accommodation providers through a levy threshold, although the limit has yet to be set and businesses should not assume the exemption will automatically apply. However, to prevent operators from avoiding the levy by splitting accommodation activities across multiple entities, the bill also includes anti-avoidance provisions that allow connected businesses to be treated as one when assessing whether the threshold has been exceeded. This could have potential implications for family-run tourism businesses, many of which operate accommodation through a combination of partnerships, trusts and limited companies.

Under the legislation, accommodation providers who deliberately avoid paying the levy, falsely claim exemptions or fraudulently seek repayments could face significant penalties.

Authorities would be able to pursue unpaid levy liabilities for up to 20 years after they are discovered and could also reassess accommodation values where they believe a property has been sold at an artificially low price, using the market value of the stay to calculate the levy instead. In practice, this would stop businesses being able to reduce their liability through heavily discounted “mates’ rates” or by assigning an unrealistically low value to accommodation.

As the bill progresses through Parliament, the CLA will continue to monitor developments and make the case against the levy, highlighting the additional administrative burden on accommodation providers and increased costs it could impose on visitors. We will seek amendments to the bill, so that if levies are introduced, the right safeguards are in place for rural tourism businesses.

If you have any further questions, please reach out to your CLA regional team.