UK holiday tax could cost billions, cut jobs

A proposed holiday tax in England would hit consumers with a £1.6 billion increase in costs while shrinking the wider economy, according to new analysis.

Research by Oxford Economics, commissioned by UKHospitality, the association representing Britain’s hospitality businesses, highlights what it describes as severe consequences for travelers, businesses and government finances if the levy is introduced.

Based on a 5% tax fully implemented by 2030, the report projects a £2.2 billion drop in GDP, alongside a £688 million fall in Treasury tax receipts and a £101 million decline in direct investment from the hospitality and tourism sector.

The impact on travel demand would also be significant. Tourism spending is expected to fall by £1.8 billion, with nine million fewer overnight stays and an estimated 33,000 jobs lost across the industry.

UKHospitality is urging the government to abandon the proposal, warning it would make domestic vacations more expensive and damage the UK’s competitiveness as a destination.

Chief Executive Allen Simpson said the findings leave little room for doubt. He argued the tax would raise costs for British travelers, reduce staycations and negatively affect businesses ranging from coastal resorts to city center operators.

Industry leaders echoed the concerns. Haven CEO Simon Palethorpe said a holiday tax would discourage domestic travel, limiting investment and employment, particularly in regions heavily dependent on tourism.

Simon Vincent, President for Europe, the Middle East and Africa at Hilton, warned that adding a new levy on top of existing VAT levels would make the UK less competitive internationally and put additional pressure on families.

Fiona Eastwood, CEO of Merlin Entertainments, added that higher costs could put short breaks out of reach for many households, while undermining regional economies that rely on visitor spending.

The analysis examined three possible models: a 5% accommodation tax, a £2 per person nightly fee, and a £2 per room nightly charge. All scenarios showed declines in GDP, tourism demand and employment.

According to Oxford Economics, any additional tax revenue generated would likely be offset by reduced economic activity, as higher prices dampen demand and weaken England’s position against competing destinations.