Calls Grow To Raise VAT Threshold Ahead Of Proposed Visitor Levy

More smaller accommodation providers on the Yorkshire Coast could close for the winter unless the national VAT threshold according to local councillors.

Earlier closures and shorter seasons will hit smaller accommodation providers on the Yorkshire Coast unless the national VAT threshold is raised. That's the concern being voiced by some local tourism leaders on the Yorkshire Coast.

The cost of stays in coastal hotels, hostels, and holiday parks could jump by up to five per cent under a proposed overnight visitor levy.

Many guest houses shut their doors for the winter to avoid crossing the current £90,000 VAT boundary.

Scarborough Councillor Janet Jefferson said:

"Our smaller accommodation providers are heavily governed by the VAT threshold, which is 90,000 pounds.

I think the threshold needs to be raised from 90,000 to at least 120 because as it is at the moment, and I'm sure Scarborough and both Whitby realize this, when these guest houses reach that figure, they do close, so we can't really achieve a 12 month period and I think we are we are putting at fault our 12 month economy.

And in order to be VAT registered, you need to turn over at least 30 or 40,000 more to cover the cost of it. It's a really big thing."

Regional Mayors will gain the power to implement a charge on holiday accommodation to fund infrastructure improvements under new government devolution reforms.

A cap of five per cent of accommodation costs for the new tax has been proposed by Labour mayors.

Councillor Jefferson said:

"My main concern is keeping our tourism in Scarborough, Whitby and Filey going and and I've seen so many times why people close October, don't open till March because of the VAT threshold.

And I do think the levy is going to make that threshold even lower. So I would like to see the threshold of VAT increased to 120,000 because I think with bringing this levy in, and if that's going to be subject to VAT, that will soon make the threshold into 90,000. So I think that is really important."

Business taxes consume 82p of every £1 in pre-tax profit made by the sector, according to figures from UK Hospitality, creating what they say is the highest effective tax rate in the United Kingdom economy.

A combined tax burden of £22.9 billion hit the sector in the 2025-26 financial year through business rates, employer National Insurance Contributions, VAT, and other government taxes, according to analysis from the British Retail Consortium.

UKHospitality Chief Executive Allen Simpson said:

"This staggering data proves what we have long been saying: that hospitality is vastly overtaxed and has the highest tax burden in the economy.

With more than 80% of every pound made going back to the Government, it is no surprise that our ability to create jobs, drive growth and regenerate the high street has been severely damaged.

If the Government wants to create jobs and drive growth in every postcode, it needs hospitality and the high street firing on all cylinders.

Hospitality's tax burden needs to be dramatically reduced. We need an entire hospitality solution to business rates, which the Government can achieve by increasing the retail, hospitality and leisure discount and providing support to the businesses hardest hit by the 2026 revaluation, in line with the support given to pubs."

A price-sensitive domestic market cannot absorb additional fees, accommodation providers warned during a recent roundtable event on the tourism levy in Whitby.

Scarborough and Whitby MP Alison Hume said:

"Tourism is the lifeblood of Scarborough, Whitby and the surrounding villages, so it was important to bring together businesses and stakeholders from across the sector to hear their views directly.

It was a constructive, informative and extremely worthwhile discussion where people spoke openly and frankly.

Every area of accommodation was represented - from hotels to hostels to holiday parks and short term lets. The overwhelming view was that introducing a levy on stays in our coastal communities during a cost of living crisis and at time when businesses are under pressure from changing visitor behaviours, high utility bills, staff costs and VAT at twenty per cent, this levy could potentially be the straw that breaks the camel's back. Understandably, the sector is extremely worried and nervous.

I do believe we need more detail before any decisions are taken.

Businesses want real and quantifiable answers on how a levy would work in practice and what it might mean for their visitor numbers and trade."