Today’s the day the Transient Visitor Levy – often called the Tourist Tax – takes full effect in Edinburgh. What is it, and what does it mean for the city’s housing market? Our latest Blog takes a look.
Edinburgh’s built environment tells the story of our city – from the tall tenements of the Old Town to the regenerated whisky warehouse flats in Leith; 1930s bungalows in the southside suburbs to the mighty mansions of Murrayfield. Tourists love visiting Edinburgh and experiencing all the city has to offer, whether staying in short-term lets, hotels or guesthouses.
Houses for its residents, however, are something that Edinburgh just doesn’t have enough of and that’s where the Visitor Levy is set to assist.
In February this year, Edinburgh City Council approved a 5% charge on the accommodation-only cost of overnight stays (before VAT) capped at the first five nights. The levy comes into effect for stays from 24 July 2026, provided these are booked or paid – in part or full – on or after 1 October 2025. In most cases, a 5% levy would result in an overall increased cost to the visitor of 6% on the price they pay for accommodation, as VAT is added to the levy.
The Visitor Levy (Scotland) Act 2024, is the first city-wide statutory visitor levy in the UK. Over the next three years, it is expected to generate more than £90 million for Edinburgh.
Funds from the levy are earmarked specifically to help tackle the city’s housing emergency by financing social and mid-market rent homes in areas like Fountainbridge, Meadowbank and Leith.
While it will not directly alter residential property valuations, it will generate ring-fenced funds to build nearly 500 affordable homes. This will help alleviate local housing supply pressures without increasing council tax.
By making holiday rentals subject to the levy, operating costs for short-term let (STL) landlords will increase slightly. Combined with previous licensing regulations, this might encourage some property owners to shift from tourist letting to the traditional residential sales or long-term leasing market.
While property prices are mainly driven by interest rates and local demand, the availability of these new-build affordable homes may well stabilise the local housing market by easing competition in Edinburgh’s highly pressured EH postcode regions.