The Edinburgh visitor levy is 5% of the accommodation cost before VAT. Not 5% of the room rate the guest paid. Not 5% of the invoice total. The pre-VAT accommodation figure — and nothing else.
It sounds like a small distinction. Over a quarter of bookings, it's the difference between a return that's right and one that's quietly over-stated on every single line.
- Levy rate
- 5%
- Applied to
- Accommodation cost before VAT
- Not applied to
- Meals, parking, drinks, transport
- Standard VAT rate (to strip)
- 20% → divide by 1.20
Which figure the levy is on
Most room rates a guest sees are VAT-inclusive — the 20% is already baked into the price. The levy, though, is charged on the accommodation cost before that VAT is added. So before you apply 5%, you have to pull the VAT back out of the rate.
And only the accommodation part counts. If the booking bundles breakfast, dinner, parking or anything else, those come out too — the levy never touches them.
How to strip out VAT
At the standard 20% rate, the net (pre-VAT) figure is the inclusive price divided by 1.20:
Net accommodation = VAT-inclusive rate ÷ 1.20 → Levy = Net × 5%
So a £180 inclusive nightly rate is £150 net, and the levy is 5% of £150 = £7.50 per night. If any part of your accommodation is VAT-exempt or zero-rated, the figure you start from is different — that's one to check with your accountant.
Wrong vs right
The same £180-a-night room, calculated two ways:
That's £1.50 too much on one night. Harmless once — but it's wrong on every booking, in the same direction.
Why a small error compounds
The VAT mistake isn't random; it over-states the levy on every line at once. Across a busy quarter that's a meaningful sum collected from guests and reported to the Council that shouldn't have been — exactly the kind of systematic error an audit is meant to catch before it reaches a return.
Does the visitor levy itself attract VAT?
Separate question — and an important one. The above is about which figure to apply the 5% to. People also ask whether the levy line you add to the guest's bill is itself subject to VAT, and how to record it in your own VAT return.
How the levy is treated for VAT on your invoices and in your VAT return can depend on your specific circumstances, and it's the kind of detail that's worth getting right from the start. Confirm the correct treatment with your accountant or HMRC before your first return — don't assume. This guide deliberately doesn't give a one-size answer, because a wrong one would be worse than none.
Never strip VAT by hand again.
LevyReady reads your PMS export, removes VAT and non-accommodation charges automatically, applies the 5% and the five-night cap, and shows its working — so you can see every figure is right.
Check my figures free →Questions
Is the levy charged on the price including VAT?
No. It's 5% of the accommodation cost before VAT. Strip the VAT out of a VAT-inclusive rate first, then apply 5% to the net figure.
How do I remove VAT from a room rate?
At 20%, divide the inclusive rate by 1.20. £180 inclusive → £150 net → levy of £7.50.
Does the levy apply to breakfast or parking on the same bill?
No. The levy is only on the accommodation portion — meals, parking, drinks and transport are excluded.
Does the visitor levy itself attract VAT?
That depends on how it's recorded on your invoices and VAT return, and can vary by circumstance. Confirm the treatment with your accountant or HMRC before filing.
This guide is general information, not tax or legal advice, and figures reflect the City of Edinburgh Council scheme as published (confirm current details on visitorlevy.scot). VAT treatment can depend on your circumstances — consult your accountant or HMRC. LevyReady does not file returns on your behalf — the operator remains legally responsible for the accuracy of all submissions.