London is one of the most popular cities in the world. In 2024, more than 20 million international visitors traveled to the city, while there were close to 90 million overnight stays by both international and domestic tourists.

But visits could get more expensive – as the UK government is planning to introduce a tourist tax in England. Regional mayors will be able to bring in a charge on overnight stays in hotels, bed and breakfasts and Airbnb rentalss.

In London, a 5 percent levy could mean an additional charge of $11 a night for tourists. This could bring in more than $300 million a year for the city, and mayor Sadiq Khan says the money can help improve the tourist experience.

The government says the funds can be used for infrastructure and transport improvements and cultural events.

Some groups, such as the Centre for London think tank, say the move will bring London in line with other major global cities. But other groups, including the Tourism Alliance – the umbrella trade association for the whole of the tourism industry in the UK – say the decision is disappointing.

"The key thing here is that its the wrong tax at the wrong time," says Eddy Leviten, Tourism Alliance Executive Director. "There is so much of a burden on businesses in tourism and hospitality and we just feel this hasn't been properly consulted upon. 

"We really strongly believe we don't need a tourism tax at this present time in England. We believe it is a disincentive to visit and it doesn't just apply to overseas visitors, it'll apply to UK citizens too.

"But looking at inbound visitors, for example from China, this is going to add an extra cost in England, when we already have high tax rates, we already have the second highest-rate of VAT in Europe, we don't have tax-free shopping, we are very uncompetitive as a country compared to most of our competitors around Europe."

London won't be the first major city to have a tourist tax. New York has one of the most expensive hotel taxes in the world – close to 15 percent a night plus a flat nightly surcharge of $3.50. Amsterdam has the priciest holiday tax in Europe at 12.5 percent a night. And Paris varies by accommodation – a night at a five-star hotel will have a tax of close to $13.

Spending by international tourists in London last year was more than $22 billion. But that was down in real terms compared with pre-pandemic levels. One reason is the axing of VAT-free shopping in the UK for international tourists four years ago.

"All these things are disincentives," says Tourism Alliance's Leviten. "It just presents a negative image of the UK when we're an incredibly welcoming country, there's so much to enjoy in the UK – tourism, shopping, events. 

"What we should be doing is providing more incentives for people to come and visit. We'd like the government to reassess the evidence base for getting rid of VAT-free shopping as well."

Tourism is vital to London's economy, and analysts say getting this latest move on tourism tax right will be necessary to ensure that the UK's capital retains its place as one of the top cities in the world.