Local authorities in Wales will be allowed to levy an additional premium on tourist taxes that are due to start in 2027. This little-known flexibility has caught out tourism leaders and left some worried by the implications.
As things stand, the basic visitor levy will be a nightly fee charged at £1.25 for guests staying in hotels, bed and breakfasts and self-catered accommodation.
At hostels and campsites it would be 75p, with councils left to decide if they want to implement the tax locally. No figures have yet been discussed for the premium, but Welsh minsters will have the power to decide the maximum amount each council could apply.
The Wales Tourism Alliance (WTA) has pointed out that many VAT-registered businesses will want to include VAT in the visitor levy, taking the effective nightly charge to £1.50 and 90p respectively. If premiums are added by local authorities, the WTA is worried the levy could become more punitive and create an uneven playing field across Wales.
A tourist tax premium was first mentioned briefly in the Welsh Government’s Visitor Accommodation (Register and Levy) Etc (Wales) Bill published in late November 2024.
The Bill states that “a principal council may add an additional levy amount(a premium) to the lower and/or the higher rate of the levy that will apply in its area. The Welsh Ministers may specify, by regulations, the maximum amount of the premium for the lower and/or higher rates.”
In Wales’ tourism sector, it came out of the blue and left many shocked. The administration is still developing how it could work but the current preference is for a fixed amount for each local council applying throughout the year.
However, in an evidence session of the Senedd’s Finance Committee, Mark Drakeford said he was open to ideas on adopting Scotland’s tourist tax system.
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This allows local authorities to charge different premiums in different areas at different times of the year, the idea being that premiums could be levied for one-off events.
Cardiff Council is among those supporting this system as it would enable the city to recoup the cost of staging expensive concerts and festivals. Last month Edinburgh became Scotland’s first “tourist tax city” when the city council agreed a 5% levy starting from July 24, 2026.
This is expected to generate £50m per year. But Finance Secretary Mr Drakeford said he preferred a simpler system that doesn’t add to administrative burdens on accommodation providers.
“At the moment, the Bill prefers the more straightforward set of possibilities, and we would probably look to translate that into the way that premiums operate,” he said.
Yet the prospect of any kind of tourist tax premium has appalled WTA chair Rowland Rees-Evans.
He said: “The tax is a regressive one anyway, in that it will hit poorer and larger families, especially those living in Wales. For a family of six who cannot afford to go abroad, and want a cheaper stay in Wales, they already face a nightly tax of £6.60 with VAT included.
“If, say, a 100% premium is added, doubling the nightly charge, this would take the figure up to £13.20. These people simply won’t be able to afford to stay in Wales and will look to go elsewhere in Britain.”
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Mr Rees-Evans continued: “This also raises the prospect of huge variations in Wales. Giving evidence to the committee, Flintshire said it was minded not to introduce the tax because the revenue likely to be raised wouldn’t make it worth their while.
“On the other hand, Powys might chose to introduce the tax and counties like Gwynedd and Ceredigion might want to charge a premium. This would leave differing charges across these counties, complicating the picture for providers and influencing visitors where they want to stay.”
How a tourist tax premium might be implemented in Wales will be refined at the next stage of the Bill.
Mr Drakeford favours a stronger framework setting out when they could be introduced and whether it should be left to the discretion of individual local authorities. Mr Drakeford is also happy to hear arguments for the axing of tourist taxes for children.
This element of the Bill is proving controversial – this week it was dubbed a “tax on babies” by an indignant national newspaper.
However, Mr Drakeford said there were clarion calls for other exclusions as well – schools, Scouts, charities and the Urdd, among others – and not all could be accommodated.
He told the committee hearing: “Our figures show that if you took all of those under 16 – of compulsory school age and below – out of the levy, the £33.3m that our modelling suggests that you would collect goes down to £21.3m. So, there’s a very significant fall in the tax take if you were to exclude children.
“If you could only, across the whole of Wales, collect £21m, you’ve eroded the chances that the levy would be of any use to any local authority. So, you’d have to find another way of keeping that tax take at least at that £33m. The only way that you can do that is to charge the people who are left paying the charge, more. You can’t have both. You can’t exclude children and keep it at £1.25.”
In fact this scenario has been modelled by Welsh Government officials. Were under-16s to be excluded, the nightly levy would rise to £2 (excluding VAT) for hotels, B&Bs and holiday lets, and £1 for hostels and campsites.
However, the Welsh Government prefers a simple, one-size-fits-all system, mindful of the difficulties accommodation providers could face if asked to check the age of guests.
Mr Drakeford pointed out that children aren’t automatically excluded from paying tax, saying: “Children buying sweets pay value added tax. Children are not excluded, by the virtue of being children, from the taxation system.”
This irked the WTA’s Mr Rees-Evans, who said: “He has clearly forgotten that children’s clothes, shoes and books are all quite rightly zero VAT-rated. He is also ignoring the fact that many other countries exclude under 18s from their tourism taxes.
“Many people in Wales are unaware that the Visitor Levy will be applied to anyone staying in Wales. This includes children staying overnight even on educational visits and people working away from home – whether or not they already live in Wales.
“In conversation with people, they’ve told me, ‘I live in Wales, I’m a Welsh speaker, I’m not going to pay the tax’.
“The bottom line is that the Visitor Levy proposals will cost people in Wales money and jobs.”