Edinburgh is a city steeped in history and culture, which has long made it a leading tourism destination – not least during the month of August, when the Edinburgh Festival Fringe takes place.

Tourism makes a huge financial contribution to the city and surrounding areas, bringing in hundreds of millions of pounds to the local economy and supporting thousands of jobs. However, the influx of tourists also puts pressure on public services and results in additional public expenditure.

For this reason, Edinburgh councillors have recently voted to introduce the Edinburgh Visitor Levy – similar to schemes which are already in effect in cities like Amsterdam, Berlin and New York – with the aim of generating additional funds that will support the city’s infrastructure.

What is the Edinburgh Visitor Levy?

The Edinburgh Visitor Levy, often referred to as a "tourist tax," is a small additional charge applied to overnight stays in the city. This policy, likely to come into effect in mid-2026, makes Edinburgh the first city in Scotland  to introduce such a levy.

The charge is the subject of consultation but is proposed as a fixed fee of 5% of the accommodation cost, capped at seven consecutive nights.  It will apply to visitors staying in all forms of paid overnight accommodation, including hotels, B&Bs, hostels and short-term rentals like Airbnb.

It is anticipated that the levy could raise £45-50 million a year once fully introduced. According to Edinburgh City Council, the funds will be used for projects that enhance the visitor experience, the improvement of public spaces, housing, and to support the arts.

The legal basis for the levy

The levy is made possible by the Visitor Levy (Scotland) Act which became law in July 2024.  The Act provides each of Scotland’s 32 local authorities with the power to create similar levies to that seen in Edinburgh. We can, therefore, expect to see other places (perhaps Glasgow, St Andrews and Highland locations) following suit – particularly if the Edinburgh pilot proves successful.

As each proposed levy must go through consultation and impact assessment phases, it may be well beyond 2026 before we see levies in other locations.

Impact on tourists

For most visitors, the levy represents a minor additional cost in percentage terms – typically only a few pounds added to the overall cost of a stay. However, the cumulative effect of this small contribution when multiplied by thousands of tourists staying multiple nights adds up to a considerable amount and could make a significant difference to the city’s ability to maintain its attractions and manage the effects of tourism.

It’s worth noting that visitor levies are common in many European cities, including Paris, Venice, and Barcelona. Edinburgh’s levy is, in some ways, in line with these international practices. Drawing parallels is risky, however. In Barcelona and Venice, where charges are gradually rising, levies are part of a deliberate strategy to manage over-tourism.  Edinburgh will do well to carefully consider the purpose and outcomes for its levy and not just follow the crowd.

The reception from locals and the tourism Industry

The introduction of the visitor levy has received a mixed response. Many locals support the move, viewing it as a fair way to address the challenges posed by mass tourism. This will no doubt have influenced councillors when deliberating the policy. After all, their electorate is made up of Edinburgh residents, not tourists.

On the other hand, some in the tourism industry have expressed concerns. There are worries that the additional charge might discourage visitors, particularly those on a tight budget. It has been highlighted that the UK already has one of the highest rates of VAT in Europe.

However, advocates of the levy argue that the fee is modest – “the equivalent of a cup of coffee” – and unlikely to deter tourists who are already planning to travel to Edinburgh.

The main burden of administering the tax will be placed on accommodation providers.  Principally, that will mean set-up and ongoing operational costs. Setting up systems to calculate and collect the levy, making tax returns, training staff on collecting and explaining the tax to guest etc. will all have a cost to businesses.

Estimates of these costs are expected to be relatively modest in most cases.

Providers will also need to consider how the tax impacts on third-party contracts (e.g. with third-party booking platforms) where commissions are based on the price of accommodation and should exclude the tax.

Smaller operators will perhaps feel the burden of yet another regulatory change most acutely, with AirBnB-type accommodation providers already targeted by other measures such as short-term letting licensing.

Summary

The Edinburgh Visitor Levy represents a significant step in the city’s efforts to balance the benefits and challenges of being a leading tourist destination. By reinvesting in the city’s infrastructure, cultural heritage, and public services, the levy seeks to ensure that Edinburgh remains a vibrant and welcoming place for visitors and residents alike.

How the levy impacts the accommodation sector, and whether the optimism for investment in enhancing the tourist experience plays out as hoped, remains to be seen.

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