The Scottish Parliament has passed legislation permitting local authorities to levy ‘tourist taxes’ on short-stay accommodation, and the Welsh Government has also stated plans to introduce draft legislation in the Senedd.

What is a tourist tax?

A ‘tourist tax’ – also known as a ‘transient visitor levy’ – is a levy on the occupation of short-stay accommodation in a local authority area. Taxes of this kind are frequently imposed in cities with strong tourist economies, in countries such as Canada, Spain, Germany, Belgium and France.

A tourist tax normally takes the form of a charge per occupied bed or room per night, levied on short-term accommodation providers. The charge can be set at a flat rate or a series of flat rates (for example, €2 per bed per night), or it can be set as a percentage of the price of the bed or room.

Tourist taxes are sometimes set at different rates for different times of the year. Some cities exempt, or give discounts for, beds occupied by children or those travelling for medical reasons. Others impose different rates on (for instance) campsites, bed and breakfasts, non-serviced accommodation, or hotels with different star ratings.

Tourist taxes in Scotland

The Scottish Parliament passed the Visitor Levy (Scotland) Act 2024 in 2024. Scottish local authorities now have the power to introduce a tourist tax. A decision to do so must include an 18-month implementation period, meaning that the earliest that any Scottish local authority could introduce a tourist tax would be the 2026/27 financial year.

The act contains various additional restrictions: for example, those receiving disability benefits are exempted and the Scottish Government can cap the number of nights in any one stay that would be liable for the tourist tax.

Edinburgh City Council has begun drafting a scheme for a tourist tax, which the it expects will launch from April 2026. Aberdeen City, Argyll and Bute, and Highland councils are also planning to consult on introducing a tourist tax.

The passing of the act followed the Scottish Government’s consultation in September 2019 on introducing a ‘transient visitor levy’, and its 2022–23 Programme for Government.

Proposals for a tourist tax in Wales

At present, local authorities in Wales have no power to introduce a tourist tax. The Welsh Government stated in May 2024 that a draft bill would be introduced into the Senedd by the end of 2024.

This followed a Welsh Government consultation on a visitor levy in September 2022, closing on 13 December 2022. The consultation proposed:

  • A levy payable by visitors, to be collected by accommodation providers. The consultation did not express a view on the best approach.. Its preference was for the same type of approach to be applied across Wales.
  • The consultation did not express a view on the appropriate rate, but it favoured the same tax rate being applied across Wales.
  • There would be a ‘cap’ on the number of nights for which a visitor levy would apply.
  • Visitor levy revenues could be spent at the discretion of the local authority, rather than being reserved for particular types of spending (hypothecated).
  • Groups such as people staying at traveller sites and people fleeing domestic violence would be exempted.

In March 2023 the Welsh Government also published:

Can a tourist tax be levied in England?

At present, in England, neither the central government nor local councils have the power to introduce a tourist tax. Primary legislation would be required to permit this. The Conservative UK Government stated on 18 September 2023 that it had no plans to do this.

However, Manchester and Liverpool city councils, among others, have introduced a form of tourism levy via a legal workaround (see below).

How much money could a tourist tax raise in England?

The Institute for Fiscal Studies estimated that a charge of £1 per person per night would raise approximately £420 million per year in England. The Northern Powerhouse Partnership estimated that £428 million could be raised. By comparison, council tax raises about £30 billion and business rates about £25 billion per year in England.

Examples of the rates imposed in a selection of European and other international cities can be found in the Greater London Authority’s report Options for a tourism levy for London (PDF). This report also states that “in most global cities, tourism levies must be spent on activities that support the sector”.

A similar list can also be found in the European Commission report – The impact of taxes on the competitiveness of European tourism – in which this type of tax is described as an ‘occupancy tax’.

Taxes on accommodation through Business Improvement Districts

Manchester and Liverpool city councils both introduced a tourism-based Business Improvement District (BID) as of 1 April 2023. This is a legal workaround, using existing legal powers, to establishing a form of tourist tax.

BIDs collect additional business rates payments (‘BID levies’) from businesses operating in specified geographical areas. They are established by local business groups, following a referendum of businesses in the area concerned. Further information is available in the Library briefing on Business Improvement Districts.

A BID must hold a fresh referendum at least every five years in order to renew its existence. BIDs are managed, and BID levy rates set, by the management board, not by the local authority. Unlike a tourist tax, a BID levy falls on business rate-payers, not on visitors.

Manchester

Manchester introduced an ‘accommodation BID’ from 1 April 2023, following a ballot on 7 November 2022. The BID levy is payable by hotels and serviced apartments with a rateable value of £75,000 or more, in an area within Manchester city centre and a small adjoining part of Salford.

Like a typical tourist tax, the BID levy amount for individual properties is based on the occupancy of the accommodation. It is known as the “City Visitor Charge” and participating businesses are encouraged to itemise it on guests’ bills.

The Manchester BID business plan expects the levy to raise £3.5 million to £3.8 million per year between 2023 and 2028. A report from the BBC in April 2024 stated that the levy had raised £2.8 million in the first year.

Liverpool

The accommodation BID in Liverpool was also established on 1 April 2023, with the BID levy payable in respect of accommodation properties with a rateable value of £45,000 or more, with a cap of £50,000 per property. The BID covers the whole of the city of Liverpool. The levy is 1.6% of a property’s rateable value, rising to 4.5% in 2024/25 and 2025/26. It is expected to raise £939,000 per year in the latter two years. The levy is administered by Liverpool BID Company.

Other tourism BIDs in the UK

Other examples of tourism BIDs exist in Blackpool, Great Yarmouth, Tweed Valley, Moray & Speyside, and Loch Ness. The Scottish BIDs cover types of business such as accommodation, restaurants, museums and galleries, and self-catering holiday lets. The amount of BID levy paid is based on the rateable value of a business’s property.

About the author: Mark Sandford is a researcher at the House of Commons Library specialising in local government and devolution in England.

Photo by:  (© By skvalval – stock.adobe.com).

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