Previously mooted as a £2 per night charge per person, the final proposal going before councillors is to tax people 5% on top of their accommodation costs for the first five nights of their stay, applying to hotels, B&Bs, guest houses short-term lets and campsites.
Up to £50m a year could be generated for the capital once the scheme is up and running, according to estimates.
Edinburgh Council leader Jane Meagher welcomed the “exciting” move but said it would not be a “silver bullet for some of the problems we face in the city”.
A recent survey found most residents agreed with a 5% visitor levy, while 51% of businesses and 62% of visitors who took part did not support it at all or thought the rate should be lowered.
Meagher acknowledged fears the changes would “have a negative effect on visitor numbers,” but said having looked at the evidence she was confident “that will prove not to be the case”.
How will it work and when does it start?
It will be up to accommodation providers to decide whether to include the tax at the point when bookings are made or charge guests when they check in. It’s expected many will opt for the former, to make the process as simple as possible.
The official implementation date is July 24, 2026. However, anyone booking accommodation on or after this date may be subject to the charge starting in May of this year.
Once collected, businesses will pass funds to the council to be spent on various projects from street cleaning to affordable housing and tourism marketing.
Who will it apply to?
Anyone booking accommodation within the Edinburgh council area boundary will be required to pay the levy, regardless of if they are a tourist visiting the city, live in the country or are a local resident.
There will be exemptions for people in receipt of the following benefits: Disability Living Allowance, Disability Assistance, Attendance Allowance, Pension Age Disability Benefit and Personal Independence Payment.
People who are homeless or at risk of homelessness, including those “whose residence is unfit for habitation or as a result of experiencing domestic abuse or other forms of violence” are also exempt.
However, these individuals will still be hit by the charge initially and are required to apply to the council for a reimbursement providing evidence of eligibility for exemption. The council said it will aim to process these within five working days of a request being made.
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How much money will it raise?
The council estimates this could generate up to £34m between its implementation in July 2026 and the end of that financial year in April 2027.
In its first full year, 2027-28, the annual income is expected to rise to £46m and climb to £50m by 2030.
This means the levy could bring in over £200m for the city in its first five years.
The cost of establishing the scheme has been estimated at £650,000 split across two years, and once fully implemented the council expects to spend £970,000 a year administrating it.
How will funds be spent?
The council has roughly set out how it intends to distribute the funds raised by a tourist tax, however no decisions have been taken yet to allocate money to specific projects.
The city must ensure it spends visitor levy income “developing, supporting or sustaining facilities or services which are substantially for or used by persons visiting the scheme area for leisure or business purposes,” as stated in the original legislation passed at Holyrood last year.
Additional guidance states investments can also be made in initiatives that “indirectly support visitors and/or the visitor experience”.
Councillors have taken this as a green light to earmark some money for building much-needed affordable housing across the city.
A report said: “Edinburgh has declared a housing emergency, and it is acknowledged that residents, especially those working in the visitor economy or culture sector, are often unable to find affordable housing options in the city.”
The final plan proposes committing £5m a year to capital borrowing repayments “resulting in approximately £70m of investment,” according to the council. “This would be invested in currently unviable stock housing sites, in order to make them habitable as mid-market housing.
“In theory, this would allow those working in the visitor economy in Edinburgh to access mid-market housing more easily, leading to an improved offering for visitors to the city.”
In addition 2% of the annual overall funds will be set aside for three improvement projects a year in the city’s most deprived communities, with ideas put to local residents for approval in a public vote. A further 2% will be reimbursed to accommodation providers “to off-set the administrative cost incurred from operating”.
Of what’s left over after these deductions, 55% will be spent on ‘city operations and infrastructure’. This includes street cleaning, graffiti removal, maintaining parks, and also cover the cost of more CCTV, lighting and underground bins. This will also help to maintain popular tourist attractions and locations popular with visitors like the Old Town, Portobello Promenade and Cramond Foreshore.
Culture, heritage and events, including Edinburgh’s festivals, is set to receive 35% of the remaining income, being “carefully balanced” between support for activities in the sector with capital investments in venues and buildings.
The final 10% will be used for ‘destination marketing and management’ to highlight “off-season attractions and inspire visitors to explore lesser-known areas” and “develop and promote diverse experiences that encourage longer stays and higher spending across all of Edinburgh”.
A new visitor levy forum comprising “representatives from the community and from businesses in the visitor economy” will discuss, advise and make recommendations to the council on matters related the scheme, such as its efficiency and whether any amendments may be required. The forum will also be consulted on how funds should be spent.
The council said all decisions around investment of the income will be made democratically by councillors.