UK Government’s Holiday Tax U-turn Expected to Increase Travel Costs

The UK Government has reversed its previous stance and decided to introduce a holiday tax, which is expected to raise the cost of domestic travel. This decision comes two months after the Tourism Minister stated in the House of Commons that there were no plans to implement such a tax.

According to UKHospitality, the tax could result in up to £518 million in additional costs for UK tourists. The organization has expressed concerns that the increased costs will be passed on to consumers, potentially fueling inflation. The holiday tax, if set at the same level as the Edinburgh visitor levy, could effectively raise the VAT rate for tourists to 27%, making it one of the highest in Europe. This rate would be significantly higher than the tax rates for tourists visiting cities like Paris, Barcelona, and Rome.

Data from Visit Britain indicates that in 2024, UK residents took over 89 million overnight trips within England, totaling 255 million nights. The introduction of the holiday tax is expected to raise the cost of domestic holidays, potentially affecting the hospitality sector.

UKHospitality has criticized the government’s decision, highlighting the contradiction between the new tax and the government’s stated aim of reducing the cost of living. The organization plans to engage with the Chancellor’s team to discuss the potential negative impacts of the tax on consumers and the hospitality industry.

The government has indicated that it will pause to consult on the implementation of the tax. UKHospitality has stated its intention to work with government officials to address concerns about the tax’s impact on the cost of living and the broader economic implications for the hospitality sector.