Council leaders and mayors in England will receive new powers to impose unlimited taxes on tourists for overnight stays, shrugging off warnings from business leaders that the measure could damage the tourism industry. Angela Rayner, the housing and communities secretary, will later on Thursday announce the details of an “overnight visitor levy” — first proposed in November — that local leaders will be able to set, according to officials familiar with the plan. UKHospitality, the trade body, cited analysis on Thursday saying the move would cost 33,000 jobs, increase tax for holidaymakers by £1.6bn and reduce GDP by £2.2bn.

Rayner will disappoint the tourism industry by announcing that there will not be a centrally imposed cap on the size of the new levy imposed on hotel rooms, bed and breakfasts and Airbnb-type rentals. Instead, she will argue that local leaders will be trusted to strike a balance between generating revenue for councils and maintaining affordability for the industry. London and some other cities are expected to announce that their local tourism levies will not go above the threshold of 5 per cent but others could, in theory, go higher.

Rayner will also confirm that the new tax will be a percentage-based model rather than a flat rate after a long-running debate between mayors. It is expected to be brought in before 2029, depending on when the legislation is passed. The Labour government first consulted on the overnight visitor levy in 2025.

The official consultation said the percentage-based model was the “fairest and more flexible way to structure a levy” and was a system that was increasingly used overseas. The government described a flat-rate model as “inherently regressive” as it would apply the same charge to all visitors regardless of the price of the accommodation. Some British cities already impose levies on overnight stays.

Edinburgh has taken.