Scottish Government signals massive change to tourist tax

If passed at Holyrood, the bill will mark a significant change to the Visitor Levy Act (2024) which granted councils the power to tax overnight stays in visitor accommodation.

Read More:

• Airbnb and booking.com not set up for Edinburgh tourist tax despite charges starting
• B&B and hotel owners 'forced to break the law' over Edinburgh tourist tax
• Edinburgh 'will work with government on tourist tax changes' amid uncertainty

In Edinburgh, the only part of the country where a visitor levy is already being applied to advance bookings, accommodation providers have complained applying the 5% charge - which is capped at five consecutive nights - is complex and is not being automatically applied by some of the biggest booking platforms.

Since October 1, accommodation bookings in the capital for after July 24, 2026 are subject to to the levy, which the council estimates could raise £50 million a year for the city by 2030.

However, as revealed by The Herald in October, Booking.com - which has over 1,800 listings in the city - said it “can’t collect a Levy for only five consecutive nights," telling businesses who use its platform: "Although the Levy is capped at five consecutive nights, we’ll attribute 5% of your rate to the Levy for the whole duration of the guest’s stay, irrespective of the length of stay. Please consider refunding any extra amount to your guests at departure.” 

Airbnb has told hosts in Edinburgh to apply the tourist tax by inflating their room rates, rather than having it automatically calculated at checkout, since the platform won’t implement the levy until July next year. 

The Scottish Tourism Alliance said it had become clear the percentage-based model "cannot be implemented in practice" and that small businesses - who are legally responsible for collecting and remitting the levy to the council, and must ensure it is clearly included in the total cost shown to guests at the time of booking or payment - were caught up in "technical, legal, and administrative complexity".

Meanwhile, the Scottish B&B Association said accommodation providers were "forced to either break the law on the visitor levy or break the laws on price marking and price quoting, because they’re literally in the position where systems can’t do it".

"Technically some people are already breaking the law," the association's chairman David Weston told The Herald.

“It’s just such a pity it’s happened this way when it could have been managed in a much better way, particularly if it had been a flat fee or a tiered flat fee," he added.

The Scottish Government's announcement, made on Tuesday, December 2, confirmed a new bill will "give councils the choice of setting a fixed amount instead".

Councils "will also be given the option of setting different fixed amounts such as for different geographical locations, times of year or types of accommodation.

"The legislation will also clarify how levies are applied to sales via third parties, such as booking platforms, and the information accommodation providers must share with councils."

The government said the bill is intended to be introduced in Holyrood early next year and it hoped it will be passed before the May Scottish Parliament elections.

The change may reassure several councils that have paused plans for tourist taxes over concerns about their impact on businesses and tourism.

However, significant alterations to Edinburgh’s scheme - shifting from a percentage-based model to a flat fee - could prove complex, potentially taking months to finalise while charges are already being applied to bookings.

Edinburgh council leader Jane Meagher said she will "work with the Scottish Government on how any potential changes could be introduced, and what this would mean for Local Authorities who have announced their intention to introduce a Visitor Levy, or already introduced it."

Councillors will likely debate whether the capital's visitor levy scheme should be amended from 5% capped at five nights to a fixed amount once the new legislation is tabled at Holyrood.

The Scottish Government's Public Finance Minister Ivan McKee said: “The visitor levy empowers councils by giving them a new way to raise money for investment in tourist services and facilities.

"Our aim has been to give councils the flexibility to design a levy that works for their areas, while ensuring businesses can easily understand what it means for them. 

“The Act passed last year was an example of partnership working between the Scottish Government, local government and tourism businesses.

"Through regular discussions with our partners, it became clear that further flexibility would be welcomed. That is why we have decided to legislate next year, to ensure local visitor levies work effectively for everyone.” 

Reacting to the announcement Fiona Campbell, chief executive of the Association of Scotland’s Self-Caterers and vice xhair of Scottish Tourism Alliance Policy Group said: “We welcome the announcement of the Expedited Visitor Levy Bill.

"It provides an innovative and pragmatic mechanism for reforming Scotland’s visitor levy, increasing local flexibility and demonstrating clear cross-party recognition that urgent change is required.

"The inclusion of a flat-rate option is a hugely positive step and something the industry could not have imagined being on the table even two months ago.

"It shows that the Scottish Government has listened to consistent, evidence-based concerns from operators, councils and wider stakeholders. The move towards flexibility mirrors the strong alignment of industry bodies, MSPs, local authorities, OTAs, and accommodation providers calling for a fairer and more practical model for implementation .

"We look forward to working collaboratively with Ministers, MSPs from all parties, local authorities, and partners across the tourism and hospitality sector as the Bill progresses through Parliament. The ASSC and STA will continue to engage constructively on the detail to ensure that the final legislation benefits communities, businesses and visitors alike."