A proposed tourist tax could significantly increase the cost of UK holidays—raising concerns about its wider impact on the economy and the hospitality sector.
Analysis by Oxford Economics suggests that a 5% levy, if fully implemented by 2030, would amount to a £1.6 billion tax increase for UK holidaymakers. The modelling, commissioned by UKHospitality, paints a broader picture of economic impact beyond just higher costs for travellers.
According to the findings, the tax could reduce UK GDP by £2.2 billion, while also leading to a £688 million drop in overall tax receipts for the Treasury. At the same time, investment in the hospitality and tourism sector could fall by £101 million, reflecting weaker demand and reduced business confidence.
Alternative approaches were also considered, including a flat £2 charge per person per night or per room per night. In each case, the outcome was similar: lower tourism spending, fewer overnight stays, and a decline in total employment across the sector.
Industry leaders argue the effects would be widely felt. Allen Simpson, Chief Executive of UKHospitality, said the proposals would drive up costs for domestic travellers and make staycations less affordable at a time when many households are already under financial pressure.
He warned that the impact would extend beyond hotels, affecting coastal towns, city centres and the wider network of businesses that rely on tourism—from guesthouses and pubs to taxi services.
The analysis highlights a key tension for policymakers. While a tourist tax could generate revenue, it also risks reducing demand and weakening a sector that supports jobs and local economies across the UK.
For now, the debate continues—but the figures underline the potential trade-offs. Higher taxes on holidays may not just affect travellers, but the broader economic ecosystem that depends on them.
