The budget is looming and while the UK tourist industry made it clear at the ABTA convention in Magalluf, Calvia, last month that id did not want to be hit by any new taxes which would drive prices up, it appears that the domestic industry is going to be slapped with extra taxes which for many Britons will make it cheaper to go overseas on holiday to popular destinations like Mallorca.
According to reports this week, Britons and other holidaymakers staying in the UK on holiday could face paying a charge for every night spent in a hotel or holiday let under plans said to be being considered by the Treasury. The surcharge on stays in the UK is expected to be outlined in next week’s Autumn Budget, with the possible ‘tax’ forecast to mean an effective tax rate of 27 per cent including 20 per cent VAT, and VAT on the tourist tax itself.
A holiday tax would cost Britons £518 million and be “another shocking” U-turn by the Government, a leading trade body has warned. According to The Express, UKHospitality, which represents hundreds of businesses across the UK, has expressed dismay over the reported plot. The trade body is calling on the Government to “stick to its word” and not introduce a holiday tax at the Budget on November 26. It stated that a levy of 5%, the rate set by Edinburgh last year, would amount to an effective consumer tax of 27% on hotels if VAT is taken into account.
Calling on Labour not introduce the levy, Kate Nicholls, Chair of UKHospitality, said: “If this is true, it would be another shocking U-turn from a Government who committed in the House of Commons only two months ago that it would not introduce a tourism tax, and in fact promised the industry the same thing in writing.”
Aviation leaders have already warned a fresh hike in air passenger duty (APD) on top of other tax rises expected in the Budget on November 26 would increase fares and threaten demand for flights. British Airways chief Sean Doyle told the Airlines 2025 conference in London last week: “Anything that increases costs isn’t good (and) any cost will feed through to fares.” Tui Airline chief executive Marco Ciomperlik described APD as “so significant”, saying: “Premium economy has the same rate as business class. We urge the government to be reasonable with APD.”
The chief executive of Jet2.com and Jet2holidays, Steve Heapy, has warned the UK government not to treat the travel sector as a ‘cash cow’ ahead of the Autumn Budget, expressing deep concerns about new tax burdens. Speaking at the ABTA Travel Convention in Calvia, Heapy expressed fears that more workers will be pushed into a higher tax bracket with the November announcements and he warned that will no be good for the travel industry, neither at home in the UK nor abroad.
Writing for Travel Weekly, Mark Tanzer, Chief Executive, ABTA said: " Last year we were promised that the largest tax-raising Budget of recent times would be “one and done”. After the Chancellor’s speech on 4 November, it’s obvious that won’t be the case. ABTA’s Budget representation, submitted in October, was clear: further tax rises aimed at the travel and tourism sector would be counter-productive – risking the very growth that the government’s economic strategy is reliant upon.
"The travel industry is subject to international competition; planes and ships can be easily moved to meet demand and react to costs. Indeed, the CEO of Ryanair, Michael O’Leary, has made this exact point in relation to Air Passenger Duty (APD), which is already by some distance the highest departure levy imposed by any developed economy. When APD was increased by above-inflation levels last year, HM Treasury assured industry this wouldn’t need to be repeated. A failure to keep that promise would damage the UK’s aviation competitiveness. That would be especially counter-productive at a time when ministers are backing airport expansion, a demonstration of faith in our sector as a long-term deliverer of economic prosperity.
"It's also clear that further increases to the cost of employment must be avoided. Last year’s rise in employer National Insurance Contributions and the National Minimum Wage significantly increased the cost of hiring people, and any further moves to load costs on employers would inevitably lead to job losses. We’ve already seen in our Future Travel Coalition surveys a weakening of appetite to take on new staff. We also urge the Chancellor to resist calls for the devolution of powers to levy local tourism taxes across England. It is clear many local authorities see these powers not as a way to invest in and improve their tourism offering, which is the proper use of revenues raised from visitors, but simply a way to plug gaps in their spending plans.
"The travel industry has been remarkably resilient since Covid. I reflected at ABTA’s recent Travel Convention that we’re lucky to work in an industry which meets so directly a core consumer demand; when times are good, people really want a holiday, and when times are tough, people really need a holiday. But, by no means does that mean we’re immune to economic pressures people face.
"While bookings have remained strong, there are signs, especially in the family market and with later booking cycles, that cost-of-living challenges are being felt. At a time when the industry already faces many cost pressures, not only from taxation but also the costs associated with meeting the government’s legal commitments to decarbonisation, there is a risk that the cumulative effect increases holiday prices and squeezes the less wealthy. After decades where travel and the clear benefits it brings have been democratised, we strongly urge the government not to put in place measures that send this progress into reverse.
"Away from taxation, targeted measures to reduce regulatory barriers for businesses are also much needed. When it comes to helping businesses with red tape or taking decisions that facilitate growth, there are important policy areas for travel where we await detailed outcomes. Business rates reform was announced in the Budget last year with the government committing to supporting high street retail businesses, but a concrete way forward has not yet emerged.
"Meanwhile, we welcomed the Chancellor’s vocal support for a youth mobility deal with the EU at the Labour Party Conference. Of course, that – and the other travel-related topics within the UK-EU summit deal, such as enhanced use of egates for UK citizens, will be subject to a negotiation. We urge the UK government to progress those talks as quickly as possible.
"ABTA research suggests there is a sizeable prize available if the potential of the sector over the next few years is realised – worth an additional £10bn annually in GVA and 146,000 jobs. But that growth won’t happen if travel businesses are deterred from investing, including and especially investing in their people. When the Chancellor steps down from the despatch box, ABTA will be looking for clear signals that this government remains committed to creating an environment that enables businesses to grow and be successful."