The government has launched a consultation regarding the design and implementation of a new local overnight visitor levy (OVL) in England. The consultation seeks feedback on the design of the OVL, including its scope and how it would be adopted locally.
Published 3 December 2025
The levy
To maintain consistency and prevent market distortions, the levy is intended to apply to virtually all types of short-term commercially let visitor accommodation used by leisure or business visitors, regardless of size, price, or booking method. Examples of accommodation that would attract the levy include hotels, guesthouses, B&Bs, campsites, caravan parks, self-catering properties, serviced apartments, and short-term lets (STLs) as well as university halls when commercially let during holidays.
The concept of a local charge on overnight stays is not new, drawing on wide international precedent. Local levies are common globally in cities such as New York, Paris, Milan, and Prague. The revenues generated from these taxes ensure visitors contribute directly to the investment in the destinations they enjoy, fostering sustainable growth by funding local events, infrastructure development, and services.
Administration
The government is considering a formal registration process for all accommodation providers, which would be designed to complement the existing national digital registration scheme for short-term lets in England, expected to launch in 2026. Currently it is proposed that the accommodation provider will be the legally liable party under a self-assessed model.
Tax authorities will require enforcement powers, including civil information and inspection powers (to audit records), the power to charge interest and penalties for non-compliance, and discretionary debt relief powers.
The exemptions
The government intends to set a core set of national exemptions based on the characteristics of the accommodation or the necessity of the stay. Certain stays would be excluded where the accommodation constitutes a person’s only or usual place of residence (e.g., long-term student housing or care homes). Stays in private homes with family or friends without a commercial transaction would also be excluded.
Proposed national exemptions also include stays in registered Traveller sites where the accommodation is a primary residence and stays in charitable or non-profit accommodation provided for shelter, respite, or refuge, provided it is not commercially operated.
The government is considering introducing a minimum threshold below which providers are not liable, such as accommodation let for fewer than a certain number of nights per year, to reduce the administrative burden on very small or infrequent providers.
Rate Structure
The government’s proposed and preferred rate structure is an ad valorem rate structure calculated as a proportion of the accommodation cost. The proportionate approach is preferred as the fairest approach; higher-cost stays incur higher charges, and this structure naturally captures price fluctuations without needing complex seasonal tiers or annual updates. However, this model becomes complicated when there is an inclusive package (e.g., accommodation bundled with meals, entertainment, or transport) and further thought is needed to determine how best to deal with this scenario. Requiring an accommodation provider to itemise costs would create an increased administrative burden and could result in an artificial split.
An alternative approach, used in some international contexts, is a flat-rate model (per person or per room, per night). While simpler to understand and administer, a flat rate is inherently regressive, requiring budget travellers to pay the same levy as those staying in luxury hotels.
The consultation is actively seeking input on whether national constraints, such as a cap on the maximum tax rate or a limit on the maximum number of consecutive nights a levy applies, should be put in place to ensure stability and protect longer-term stays.
Use of Revenues and Local Investment
The core intention of the levy is to provide a reliable revenue stream for local leaders to undertake investment decisions that deliver economic growth and improve the local visitor economy over the medium term. The levy is designed to ensure that visitors who benefit from local services and amenities contribute to the economic sustainability and improvement of the places they visit.
Revenues could be invested in transport, regeneration, cultural facilities and urban regeneration projects, thereby making places more attractive for residents, businesses, and visitors. The funds could also be distributed among constituent local authorities to mitigate pressures on local services, like street cleaning, waste management, and park maintenance, which face additional strain from visitor activity. The consultation is considering whether a minimum revenue share for local authorities should be mandated.
Liability, Assessment, and Accountability
The system is proposed to operate on a self-assessed basis, requiring accommodation providers to calculate the amount based on the value or number of chargeable overnight stays, collecting it, and paying it to the relevant authority. The tax point is proposed to be the date of arrival, ensuring the levy is based on actual occupancy.
This is consistent with international and UK approaches (Wales and Scotland) and acknowledges that providers hold the necessary booking and cost information. While providers will likely pass the cost onto the visitor, the decision on how to communicate this is left to the individual provider.
Implementation
Local leaders will have the power to set the specific chargeable levy rate for their area and can therefore balance the need to generate sufficient revenue with maintaining affordability for visitors and businesses. This flexibility could also extend to varying the rate for different accommodation types, such as setting a higher rate for STLs to address concerns about their impact on local housing markets.
To allow businesses and local authorities adequate preparation time, Mayoral Strategic Authorities must provide a minimum of twelve months’ notice before introducing a levy. Before a levy is introduced, the Strategic Authority must undertake a formal public consultation, involving accommodation providers, residents, and community groups. The local leaders must publish a prospectus detailing the rate, exemptions, area of application, and how revenues are planned to be spent.
The consultation
The consultation seeks feedback on the design of this new power, including its scope, how it would be adopted locally and what national and local exemptions should be required.
The initial consultation period itself lasts 12 weeks, running from November 26, 2025, to February 18, 2026.