A proposed tourist tax on overnight stays in London could raise more than £350 million annually, according to new modelling shared with local authorities.
The projections come after the Mayor of London was granted powers last year to introduce a levy on overnight visitors following years of lobbying central government.
Analysis by Central London Forward, which represents 12 inner London boroughs, estimates a three per cent charge on accommodation costs could generate £352 million each year.
That figure significantly exceeds earlier estimates suggesting annual revenues closer to £240 million.
The proposed levy would apply to hotel stays and short-term lets, including platforms such as Airbnb.
Central London Forward argues that a percentage-based system would be fairer than a flat per-night charge.
Under a flat fee model, budget and luxury travellers would pay the same amount, regardless of room price.
A flat rate would also require frequent adjustments to keep pace with inflation, increasing administrative complexity.
The modelling shows that the 12 central boroughs alone would generate approximately £275 million from the levy.
The remaining London authorities would contribute an estimated £77 million.
Central boroughs account for 71 per cent of hotel rooms and 67 per cent of short-term lets across the capital.
Westminster alone could raise more than £95 million annually, with Camden, Kensington and Chelsea, and Tower Hamlets each forecast to exceed £20 million.
The projected imbalance has prompted calls for central boroughs to retain at least half of the revenue raised.
Local leaders argue tourism places disproportionate pressure on services funded primarily by residents.
Cllr Adam Hug, Chair of Central London Forward and Leader of Westminster City Council, said: “Central London boroughs play a crucial role in ensuring the visitor economy grows and thrives.”
“We work to keep the streets clean, well maintained and safe, we invest in new public realm projects and support businesses, yet many visitor services are funded by residents,” he added.
“The Government should legislate to ensure that at least 50 per cent of the revenue raised by an overnight stay levy is kept by London boroughs.”
Tourism capacity in London is expected to expand further over the coming years.
There are currently 196 hotels in planning, under construction, or undergoing renovation, potentially adding nearly 29,500 rooms.
Short-term rental listings are also growing by around two per cent annually.
That expansion alone could generate an additional £13.1 million per year, including £7.2 million in central boroughs.
A spokesperson for the Mayor said the levy would support London’s economy and strengthen its global competitiveness.
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