Edinburgh Visitor Levy Scheme: an overview

In January this year Councillors formally voted in favour of the introduction of Edinburgh’s Visitor Levy Scheme. Widely referred to as a “tourist tax”, the levy will be the first of its kind in Scotland but similar schemes have been in operation in other tourist hubs across Europe and beyond for some time.

The levy is a 5% charge on the cost of paid overnight accommodation within the Council area from 24 July 2026 which is booked and paid for (in part or in full) on or after 1 October 2025. So hospitality providers in Edinburgh have just six months to prepare to implement systems to manage the incoming Visitor Levy Scheme, but businesses need to act now and consider what systems they need to update ahead of the change.

A lot of current advice for businesses on the Edinburgh City Council page directs people to a Visit Scotland FAQs page, which frequently re-directs individuals back to contact their local authority for specific information. An important detail for accommodation providers to note is that the Edinburgh City Council website says it will post updates on the scheme and its implementation over the coming months. This may feel frustrating for many businesses who face having to check for important updates about the scheme during peak season.

With little clear on the implementation of the scheme, we want to provide a clear background so accommodation businesses can understand why the levy has been introduced, and who it will affect.

Why is it being introduced?

Edinburgh has long been a popular tourist destination and its reputation for the Fringe Festival and its Hogmanay fireworks display extends worldwide. With visitors continuing to flock to the city there is a need for ongoing investment in public services to cope with the demand.

The primary objective of the Scheme is to generate revenue that can be reinvested into the city’s infrastructure and public services. The Council states that the Scheme is designed to “sustain Edinburgh’s status as one of the world’s greatest cultural and heritage cities”. Reinvesting the revenue received via the levy is seen by the Council as crucial for maintaining and enhancing the quality of life for both residents and visitors. It is intended to offer not only an economic boost to the local economy but also to enhance visitors’ experience by virtue of such investment.

What is the levy and to whom does it apply?

Key details of the levy are:

• It is a 5% charge on the cost of paid overnight accommodation within the Council area from 24 July 2026 which is booked and paid for (in part or in full) on or after 1 October 2025.
• It is to be charged on the first 5 nights’ stay and will be charged before VAT but is not charged on extras such as parking, meals, drinks or transport as the charge is to focus on the core cost of accommodation.
• It applies to various types of accommodation including hotels, bed and breakfasts, guesthouses, hostels and short-term lets and so will apply to those staying in Airbnbs.
• Subject to the exemptions below, it applies to anyone staying in paid overnight accommodation within the Council area which is not their only or usual place of residence and so includes not only overseas tourists but is also payable by Scottish and UK residents, whether visiting on business or otherwise. So, whilst often referred to as a “tourist tax” that does not quite tell the full story and those visiting the city on business will be liable for the levy.
• It does not apply to the homeless or those at risk of homelessness, people with very poor housing conditions, people experiencing domestic or other forms of abuse, asylum seekers and refugees and members Gypsy or Traveller communities staying on dedicated sites. Those staying in the same accommodation as persons receiving certain UK/ Scottish benefits are also exempt.
• Accommodation providers may apply to the Council for a discretionary exemption if their property is occupied by a charity or trustee of a charity and overnight stays are wholly or mainly for charitable purposes.
• Whilst visitors will ultimately bear the cost of the levy, it is accommodation providers within the Council area that will be liable for administering the charge and making payments to the Council. They will be required to submit quarterly reports to a national online visitor levy portal detailing their total accommodation charges and the total levy collected. Accommodation providers who fail to comply may be subject to penalties.

Potential benefits of the levy

1. Economic Boost: The Council has projected that the levy will raise £45 – £50 million per year by 2028/29, providing a significant boost to the local economy which can be reinvested into local infrastructure and public services – improving roads, public transportation, and other essential services, benefiting both residents and visitors, which might otherwise be unaffordable.
2. Enhanced Visitor Experience: By investing in infrastructure and public services and improving amenities and attractions, the city can offer an improved experience to visitors, encouraging repeat visits and a positive global reputation.
3. Sustainable Tourism: By funding projects aimed at reducing the environmental impact of tourism, the levy could enhance sustainable tourism practices, helping to balance the needs of visitors with those of the local community and environment with a view to ensuring the preservation of Edinburgh’s natural and cultural heritage for future generations.

Concerns with the Scheme

1. Affordability of accommodation: Concerns have been voiced that the levy will affect the affordability of accommodation, which could reduce tourists’ spending in the wider visitor economy during their visits or deter tourists (both overseas and domestic) from visiting the city at all. Reduced spending or tourist numbers would put a strain on businesses within the hospitality and tourism sectors, particularly small businesses where margins are already increasingly tight amid rising employee costs following the 2024 Autumn Budget announcement.
2. Administrative burden: Under the Scheme accommodation providers are required to keep accurate records of all transactions that are subject to the levy and the Council may conduct inspections to ensure compliance with the Scheme. To comply with these requirements accommodation providers will need to implement systems to collect and remit the levy, putting an administrative and financial burden upon them in setting up the necessary systems, training staff and explaining the tax to guests. To address these challenges, Councillors voted to alter the transition period such that the Scheme applies to bookings for stays which are made and paid for in full or part on or after 1 October 2025 rather than 1 May 2025 as was originally proposed (as above, the levy is applicable to stays from rom 24 July 2026 onwards). The Council has also stated that 2% of levy funds collected (after administration and contingency costs) will be reimbursed to accommodation providers to cover some of the direct costs which will be incurred in the collection of the levy, such as credit card charges and amendments to accounting systems.
3. Use of the revenue received: The legislation under which the Scheme is introduced (The Visitor Levy (Scotland) Act 2024) provides that a local authority must use the proceeds of the Scheme in developing, supporting and sustaining facilities and services which are substantially for or used by visitors to the local authority. However, those opposed to the Scheme have expressed concern around the Council’s use of the revenue generated and the need for transparency to ensure that funds are reinvested into the community.

Summary

With the projected additional revenue to be generated by the levy, the Scheme has the potential to bring substantial benefits to the city, its residents and tourists alike if public services and facilities are to be improved.

However, it remains to be seen whether the additional charge will discourage tourists from visiting Edinburgh or adversely affect their experiences of it or if, on the other hand, increased investment in the city from the revenue generated will enhance the visitor experience and support continued growth within the tourism and hospitality sectors. Ensuring that the additional revenue is effectively reinvested into the community, and the Council’s transparency around such reinvestment, will no doubt be a key factor in determining whether the Scheme proves to be a success.

The Scheme will present challenges to accommodation providers, particularly in the early stages of implementation and small businesses with limited resources could be amongst those who find it difficult to adapt. In addition to the use of the revenue generated, the success of the Scheme may depend upon how well the Council engages with and supports providers to address the challenges they face.

The 2024 Act allows Scotland’s other local authorities to create similar levies and so whilst Edinburgh’s levy is the first of its kind in Scotland, it’s unlikely to be the last and we can expect other local authorities to follow suit in due course if the Scheme in Edinburgh is successful.

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