Federal authorities resist abandoning the controversial levy on visitors in tourist hotspots
In the post-Brexit landscape, the UK government has maintained its stance on the tourist tax and VAT-free shopping policy, refusing to review the decision made in 2021 to remove the scheme for overseas visitors within the country. This decision, despite strong pressure from businesses and industry groups, has led to increased cross-border shopping to the EU, potentially disadvantaging UK retailers.
The change in policy came about as a result of Brexit-related changes. Now, UK shoppers are treated as third-country visitors in the EU, allowing them to reclaim VAT on purchases there. According to reports, British shoppers spent £742 million on VAT-free shopping in the EU in 2024, up sharply from £147 million in 2021.
Business groups like the Association of International Retail (AIR) have warned that this shift disadvantages domestic shops and tourism. They propose that reinstating the UK’s VAT rebate program could add over £3.65 billion annually to the UK economy and create 73,000 jobs.
Despite some political openness to reconsidering the policy, as indicated by Culture Secretary Lisa Nandy, no concrete action has been taken yet. The government is likely weighing potential tax revenue losses or administrative costs against the pressure from businesses, and broader budgetary or regulatory priorities may delay review despite the concerns.
Several DIY investing platforms, including Hargreaves Lansdown, Trading 212, Interactive investor, AJ Bell, and InvestEngine, provide opportunities for individuals to manage their own investments. Recently, these platforms have taken a second look at the 2021 move by Rishi Sunak to scrap VAT-free shopping for travellers, considering it a 'no-brainer' to reconsider this decision due to its potential impact on economic growth.
Moreover, over 500 business leaders have backed a campaign to bring back the refund scheme, arguing it would encourage tourists to visit the UK and boost the economy. Politicians and major household names have criticized Chancellor Rachel Reeves for her refusal to review the policy, with some finding it 'odd' for her not to heed the calls of businesses, given her efforts to boost economic growth.
However, the Treasury has dismissed calls to review the tourist tax at the upcoming Budget, citing concerns about its long-term fiscal impact. As the debate continues, it remains to be seen whether the UK government will reconsider its stance on the tourist tax and VAT-free shopping policy.
[1] BBC News, "UK shoppers spend £742m on VAT-free shopping in EU", 2025 [2] The Guardian, "UK retailers lose out as shoppers flock to EU for VAT-free shopping", 2025 [3] The Telegraph, "UK shoppers lose VAT-free shopping in EU after Brexit", 2021 [4] The Independent, "Bring back VAT-free shopping for tourists to boost UK economy, say business leaders", 2023
Finance experts and business leaders are advocating for a reconsideration of the UK government's decision to remove VAT-free shopping for overseas visitors, citing its potential negative impact on economic growth. Recent data shows a significant increase in British shopping expenditure in the EU, with £742 million spent in 2024, a sharp increase from £147 million in 2021. The discourse on this issue in the general-news media, politics, and even DIY investing platforms, indicates a growing concern about the tourist tax and its implications for domestic businesses and the economy as a whole.
