Introduction
The Visitor Levy (Scotland) Act 2024 enables local councils in Scotland to impose a Levy on paid overnight accommodation, commonly referred to as the “tourist tax”, as highlighted in our initial article. Following the legislation enactment, Edinburgh City Council confirmed that the Visitor Levy will apply to overnight accommodation, discussed in our previous article. Edinburgh City Council has issued guidance ahead of the Levy’s implementation beginning 1 October 2025 for bookings paid (in part or full) on and after 24 July 2026 to support accommodation providers in understanding their obligations.
Edinburgh visitor levy scheme guidance
The guidance determines the Levy will apply to all overnight accommodation within the Council’s boundary, including providers with turnover below the VAT registration threshold. The Levy is set at 5% of the accommodation cost, excluding VAT and is capped at five consecutive nights. The taxable portion does not include charges for meals, drinks, parking or other services. In calculating turnover, the Visitor Levy must be included in determining if a business is required to register for VAT, for businesses below the VAT threshold.
Accommodation providers have discretion over when to charge the Levy: at booking, check-in, check-out or by absorbing the costs. The guidance reiterates that UK price transparency laws (Digital Markets, Competition and Consumer Act 2024 and Price Marking Order 2004) require the Levy to be included in the final advertised price.
The Levy becomes payable once a guest has purchased the right to stay and entered the accommodation. If a pre-paid booking is cancelled, the Levy must be refunded.
The guidance confirms that exempt individuals (including, for example, individuals with unsafe or unfit homes, the homeless, asylum seekers amongst others) must pay the Levy upfront and reclaim it from the Council after entering accommodation liable to charge the Levy, however further guidance is to follow as the category of exempt individuals is complex. A discretionary exemption is available for accommodation provided for charitable purposes. To qualify, providers must apply to the Council where the property is occupied by charity or trustee of a charity, and overnight stays are wholly or mainly for charitable purposes. Accommodation providers who do not charge for overnight stays or who exclusively accommodate exempt individuals are not liable for the Levy.
The accommodation provider has responsibility for collecting and remitting the Levy quarterly to the Council via an online platform which is currently under development.
Accommodation providers have discretion over when to charge the Levy: at booking, check-in, check-out or by absorbing the costs. The guidance reiterates that UK price transparency laws (Digital Markets, Competition and Consumer Act 2024 and Price Marking Order 2004) require the Levy to be included in the final advertised price.
The Levy becomes payable once a guest has purchased the right to stay and entered the accommodation. If a pre-paid booking is cancelled, the Levy must be refunded.
The guidance confirms that exempt individuals (including, for example, individuals with unsafe or unfit homes, the homeless, asylum seekers amongst others) must pay the Levy upfront and reclaim it from the Council after entering accommodation liable to charge the Levy, however further guidance is to follow as the category of exempt individuals is complex. A discretionary exemption is available for accommodation provided for charitable purposes. To qualify, providers must apply to the Council where the property is occupied by charity or trustee of a charity, and overnight stays are wholly or mainly for charitable purposes. Accommodation providers who do not charge for overnight stays or who exclusively accommodate exempt individuals are not liable for the Levy.
The accommodation provider has responsibility for collecting and remitting the Levy quarterly to the Council via an online platform which is currently under development.
Payment
The first payment will be due in October 2026, covering the period from 24 July to 30 September 2026. Importantly, accommodation providers are also responsible for retaining records for five years following each stay.
Penalties for non-compliance or late payment will be proportionate, with consideration given to whether reasonable steps and due diligence were taken by the accommodation provider. Specific penalties are yet to be confirmed.
To recognise and offset the administrative costs of implementing the Levy, providers may retain 2% of the Levy collected, with the retention mechanism still to be confirmed.
Penalties for non-compliance or late payment will be proportionate, with consideration given to whether reasonable steps and due diligence were taken by the accommodation provider. Specific penalties are yet to be confirmed.
To recognise and offset the administrative costs of implementing the Levy, providers may retain 2% of the Levy collected, with the retention mechanism still to be confirmed.
Challenges of the roll out period
Businesses face a tight deadline to implement systems for tracking the Levy for bookings from 1 October 2025. This may result in upfront financial costs due to operational challenges and the administrative burden.
Key challenges include adapting booking systems, particularly third-party booking systems, to ensure the Levy is applied to stays booked starting from 1 October 2025 for stays from 24 July 2026 and clearly disclosed to customers.
The administrative burden on providers includes ensuring the Levy is collected, accurately managed for record keeping purposes and submitting quarterly returns as well as remitting the Levy to the Council.
Accommodation providers within the Edinburgh City Council boundary should begin reviewing systems, pricing and sales platforms and record keeping processes to ensure full compliance with the Visitor Levy requirements.
Key challenges include adapting booking systems, particularly third-party booking systems, to ensure the Levy is applied to stays booked starting from 1 October 2025 for stays from 24 July 2026 and clearly disclosed to customers.
The administrative burden on providers includes ensuring the Levy is collected, accurately managed for record keeping purposes and submitting quarterly returns as well as remitting the Levy to the Council.
Accommodation providers within the Edinburgh City Council boundary should begin reviewing systems, pricing and sales platforms and record keeping processes to ensure full compliance with the Visitor Levy requirements.
If you have any questions on how the introduction of the Visitor Levy in Edinburgh affects your business, please do not hesitate to contact Caroline Colliston, Zita Dempsey or your usual DWF contact.
