London tourist tax on accommodation will be capped at 5pc, mayor says

A new tax on overnight stays in London will be capped at 5 per cent of the cost of accommodation, the BBC has reported.

Under the legislation, local authorities will be able to charge a flat fee or a percentage of the cost of an overnight stay for domestic and international guests in London accommodations.

London Mayor Sir Sadiq Khan told BBC London that he welcomed plans by the government and promised it would not be above 5 per cent per night.

"I fully support the government's decision, after years of lobbying, to give us the same powers that other cities, from New York to Los Angeles, from Chicago to Paris … have, which is the ability to raise a levy on those who come to our great city," he said.

"We've got to invest in making sure that [our] city continues to be attractive."

There are concerns the costs could put visitors off heading to London, an extremely popular destination for Australians heading abroad.

Between November of last year and February of 2026, the UK government consulted on the design of a new power for English councils to introduce overnight visitor levies or a "tourist tax".

The legal framework to do so will be introduced in the Overnight Visitor Levy bill, which has not yet been tabled in parliament.

A visitor levy set by English mayors would apply to hotels, guesthouses, bed and breakfasts, hostels, campsites, self-catering properties, and short-term lets, and university and religious accommodation when let commercially.

The levy would be set as a percentage of the price of the accommodation.

They would also be able to choose to set a visitor levy in some of their local authority areas but not others.

Members of the combined authority would be able to reject a levy by a two-thirds majority.

It will bring England in line with Scotland and Wales, which have already introduced powers for local authorities to raise a visitor levy.

The bill proposes that English mayors can spend revenue from the levy for "broader initiatives which have a positive impact on the region's economic health."