The Visitor Levy (Scotland) Act 2024 empowers local councils in Scotland to impose a levy on paid overnight accommodation. The initiative aims to support local facilities and services that are heavily utilised by visitors. The levy can be applied to various types of accommodations, including hotels, bed and breakfasts, and short-term lets. The tax amount is calculated by multiplying the VAT- exclusive "accommodation portion" of the transaction by the council's chosen levy rate.
The Act provides a framework for the introduction and administration of the levy. It outlines who is liable to pay, the process for implementation, and includes provisions for exemptions and rebates. Councils are mandated to conduct a formal consultation process before implementing the levy. Importantly, each council is granted flexibility to set its own rate, potentially leading to regional variations.
Edinburgh
After a formal 12-week consultation, the City of Edinburgh Council has been the first council to implement the new levy, from 24 July 2026. The levy has been shaped by engagement with local businesses, residents and tourist stakeholders. The levy is set at 5% of the cost of the paid overnight accommodation, excluding extras such as parking, meals, drinks, or transport. The levy can be applied to the first five nights of a stay and will be charged at the same rate throughout the year. The primary goal of this levy is to generate significant revenue for the city, estimated to generate between £45-50 million a year by 2028/29, with funds collected to be reinvested into city infrastructure, sustainable tourism, affordable housing and supporting major events.
Businesses in Edinburgh are currently trying to prepare for the administrative burden of making quarterly payments, submitting returns and maintaining records to avoid penalties for late filings (starting at £100 plus 5% of tax due) against a backdrop of uncertainty and a lack of clarity around process. Although 2% of the revenue of the levy will be given to accommodation providers to cover these administrative burdens, the administrative demand the levy places on businesses, especially small businesses, cannot be underestimated.
Glasgow
After initial consultations with stakeholders, the formal consultation process for Glasgow's 5% visitor levy is now open. Glasgow residents have 12 weeks to share their views on Glasgow City Council's proposal to charge visitors a 5% levy, with 3.5% of the levy to be retained by the city and 1.5% to be given to accommodation providers to cover their administrative costs. Councillors will make a final decision regarding the levy later this year. This consultation will form a key part of the information that will be considered, alongside the informal consultations already carried out with stakeholders. The earliest the levy could be introduced in Glasgow is 2027 and, if passed, Glasgow City Council’s treasurer has indicated it will be rolled out as fast as possible but it is unlikely to be in place in time for Glasgow hosting the Commonwealth Games again next year.
Beyond Glasgow and Edinburgh…
Highland Council, Aberdeenshire, Perth and Kinross, Moray, and the island authorities of Orkney, Shetland, and Comhairle nan Eilean Siar, are in various stages of exploring similar levies.
Aberdeen City Council is currently considering a 7% Visitor Levy, costing visitors an average of £5 per night despite warnings that this may impact the local tourism-related economy.
Commentary
Critics argue that levies may deter tourists from visiting Scotland, particularly during peak periods when accommodation costs are already very high or it could displace tourists to other areas of Scotland where accommodation costs are lower during peak season.
This imposes an additional administrative burden onto businesses, particularly small and medium-sized ones, at a time when they are struggling to contend with changes to the National Minium Wage, employment law and the increase in employer NICs, not to mention the continual war for talent.
Whilst the introduction of a levy has the potential to fund essential projects to attract tourists and invest in our cities, it should be recognised that a very high proportion of Scotland’s tourists are domestic tourists and the increase in costs has the potential to drive some of that market out of Scotland.
Accommodation providers across Scotland must take steps to understand the impact of the potential levies and actively engage with local authorities throughout their consultation processes to ensure that their voices are heard.
If you have any questions on how the introduction of the Visitor Levy in Scotland affects your business, please do not hesitate to contact Caroline Colliston, Zita Dempsey or your usual DWF contact.
This article was authored by Julia Shaw and Caroline Colliston.
