Plans to give mayors in England the power to introduce a levy on tourists are expected to be outlined on Thursday.
Under the proposals, a fee would be charged to people staying overnight and local leaders would decide how the revenue raised should be reinvested.
The idea – dubbed the tourist tax – was first raised by Sir Keir Starmer’s government in November and is similar to a scheme running in Scotland.
The levy will be charged as a percentage of the cost of accommodation, rather than as a flat fee – a move the government argues will protect budget holidays.
In theory, there will be no upper limit – though ministers are said to believe mayors are unlikely to make it too expensive.
The government will announce more details after the Housing Secretary Angela Rayner meets mayors on Thursday.
A government source said “it will be up to local leaders and local voters” in England “to decide what is right for their area”.
The Overnight Visitor Levy, which was outlined in the King’s Speech in May, means a holiday in England could become more expensive if local leaders decide to implement the tax.
Sir Keir had planned to bring forward legislation to introduce the levy before he was replaced as prime minister by Andy Burnham but the bill has not been brought forward yet.
The prime minister has framed the policy as part of his wider devolution agenda, and No 10 previously said local leaders would be “able to set out plans for how revenues will be invested by March 2028”.
Burnham was mayor of Manchester when the city introduced the City Visitor Charge in April 2023 – a £1 per room, per night fee – to pay for measures aimed at attracting more visitors.
Regional mayors say the levy is needed to raise more income to invest in local priorities and support economic growth.
However, trade body UK Hospitality warned earlier this year that such a tax would raise the cost of holidays as households continue to face cost‑of‑living challenges.
It said additional charges risked undermining international competitiveness and discouraging domestic breaks, particularly for families and young people.
These taxes are common in Europe and the rest of the world, with New York, Amsterdam and Rome applying overnight charges to accommodation stays to fund local services.
Mayor of London Sir Sadiq Khan supports a tourist tax on overnight visitors, which could raise more than £350m a year for the capital, according to analysis in January.
The figure from Central London Forward (CLF), which represents 12 central London local authorities, was based on a 3% levy on the cost of a room, whether a hotel or short-term let.
In Scotland local authorities can introduce a visitor levy on overnight accommodation set as a percentage rate.
Edinburgh became the first city there to introduce the tax in July, with those staying overnight in hotels, bed and breakfasts and self-catering accommodation charged an additional 5% on top of their original booking cost. However, the charge is capped at five nights.
Elsewhere in Scotland, a 5% levy in Glasgow is due to come into force from January 2027.
In Wales, a capped levy of £1.30 per person per night is set to be introduced in April next year.