Edinburgh's visitor levy: what London travel agents pay

Edinburgh's 5 per cent visitor levy, charged on stays from 24 July 2026, now sits inside the cost of the Edinburgh breaks London travel agents sell. A change to Scotland's law, in force three days before the levy began, settled how it works when an agent sits in the middle. The levy is charged on what the agent paid the hotel for the room, not on what the customer paid for the holiday.

How Edinburgh's levy works

City of Edinburgh Council charges 5 per cent of the cost of paid overnight accommodation, on the first five nights of a stay. Stays booked and paid for, in whole or in part, before 1 October 2025 are not caught. The council says the levy is charged before VAT, and not on extras such as meals, drinks, parking or transport.

The hotel, guest house or other provider is the one liable to pay it to the council. It can arrange for the money to be collected from guests. Other Scottish councils can introduce schemes of their own under the same Act.

When an agent buys the room

The Visitor Levy (Amendment) (Scotland) Act 2026 added a rule for rooms bought by a third party and sold on, which took effect on 21 July 2026. Where an agent or tour operator buys the right to stay from the accommodation provider, and the guest then buys it from the agent, section 3 of the Visitor Levy (Scotland) Act 2024 now makes the first sale the one that is taxed: the sale from the hotel to the agent.

So the levy is worked out on the room price the hotel charged the agent. It is not worked out on what the customer paid the agent, so the agent's own mark-up on the room sits outside it, as do transport and meals. How the cost then reaches the agent, built into the room rate or as a separate line, is a matter for the contract with the hotel.

At the time of writing, HMRC had published no guidance on gov.uk on how VAT applies to visitor levies. Ask each hotel how the levy will appear on its invoice to you.

Passing it on, or absorbing it

For a package sold before a levy took effect, the Package Travel Regulations let the price rise only if the contract expressly allows it and the rise comes from a change in taxes or fees imposed by third parties, "including tourist taxes". The contract must also give the customer a matching cut if such costs fall, the customer must be told at least 20 days before the trip starts, and a rise above 8 per cent lets them cancel.

Whatever an agency absorbs comes off its margin. On a UK break sold in its own name, that margin is where the agency's VAT is worked out under the Tour Operators' Margin Scheme, and it is standard-rated. So roughly a sixth of an absorbed cost comes back as lower VAT, and the rest is lost profit.

What it looks like on one break

Illustration, not a real client. An agency in Islington sells a couple a Hogmanay package: four nights in an Edinburgh hotel from 29 December, with rail travel, for £1,500. The hotel charges the agency £150 a night for the room before VAT, with breakfast billed separately.

• The levy: 5 per cent of £150 for each of the four nights, which is £30. Breakfast is outside it.

• If the hotel adds exactly £30 to its bill and the agency absorbs it, because it priced the break without the levy, its margin falls by £30. The VAT on that margin falls by £5, and the agency is £25 worse off.

England could be next, London included

In its response to the consultation on 10 September 2026, the government said it will give mayoral authorities in England, a group that includes the Greater London Authority, the power to set an overnight visitor levy. It will be a percentage of the accommodation cost, with accommodation providers liable to pay it, and the government intends to legislate during the current session of Parliament.

It also said that how the levy applies to rooms sold on in package holidays and by third parties is still being worked out. Edinburgh has already answered that question. England has not.

What to do now

1. Read each Edinburgh hotel contract for how the levy is charged to you, and on what.

2. Price the levy into Scottish breaks you have not sold yet.

3. Check your booking terms allow a price revision for tourist taxes on breaks already sold.

4. Keep the levy visible in your margin figures. Our page on how VAT works for a travel agency selling in its own name explains why that margin is the number that matters.

A levy of 5 per cent sounds like the hotel's problem. For an agency that sold the break without it, on terms that do not allow a price revision, it is a cost with no one else to pass it to.

About the author

Harvey Dhillon is the founder and CEO of Zmartly, a UK accountancy firm for small businesses. He grew up in West London and began his career in investment banking finance at Barclays, before going full-time on Zmartly in 2020. He is a Chartered Management Accountant (ACMA, CGMA).

Featured photo by Connor Mollison on Unsplash.