27th October 2026
Hospitality support raises questions about fairness as small accommodation providers face rising costs, new charges for visitors and uncertainty over the future of rural tourism.
The Government has promised additional support for pubs, recognising their importance to local communities and the financial pressures facing the hospitality industry. But the decision to give pubs special treatment raises a reasonable question: what about the small bed-and-breakfast businesses, guest houses and other accommodation providers that also help sustain local economies?
The issue becomes more complicated when business-rates relief is considered alongside proposals for visitor levies. In Scotland, councils are developing different approaches to charging overnight visitors, with the money intended to improve tourism infrastructure and services.
For small businesses, however, the practical effect could be a combination of rising operating costs, administrative responsibilities and the need to explain additional charges to customers.
Why are pubs receiving special treatment?
Pubs have become a particular focus of concern because of rising operating costs, pressure on household spending and the continuing closure of venues in some communities.
In England, the Government introduced 15% business-rates relief for eligible pubs and live-music venues in 2026/27 and subsequently announced a further 20% reduction in pub business-rates bills from April 2027.
The argument is that pubs often provide a social meeting place, particularly in villages where other public venues have disappeared. They can support local events, provide jobs and offer a place where residents can meet without having to travel elsewhere.
But these benefits are not exclusive to pubs.
A small guest house may employ local people, buy food from nearby suppliers, recommend local attractions and bring visitors into shops, restaurants and other businesses. A B&B can also provide accommodation for contractors, visiting relatives and people attending local events.
If community value is the justification for additional assistance, it is reasonable to ask why similar consideration should not be given to other small hospitality businesses.
Scotland has a different system
Business rates are devolved in Scotland, so the Scottish Government determines its own relief arrangements.
For 2026/27, eligible retail, hospitality and leisure properties on the Scottish mainland can receive 15% business-rates relief, subject to the scheme's conditions. A separate 40% relief scheme covers eligible hospitality premises, including qualifying hotels, pubs and restaurants. Eligible hospitality businesses on islands and in specified remote rural areas can qualify for 100% relief, subject to the applicable rules and financial cap.
B&Bs and guest houses can qualify for the 15% scheme but do not automatically receive the higher rate simply because they provide tourist accommodation.
The position therefore differs between business types and between Scotland and England. Individual eligibility also depends on the property and how it is used.
The practical question for owners is what they actually pay after all applicable reliefs have been taken into account.
Now comes the visitor levy
Scotland's Visitor Levy legislation gives local authorities the power to charge people staying in overnight accommodation, with the money reinvested in facilities and services used by visitors.
Edinburgh introduced a levy of 5% on overnight accommodation on 24 July 2026, applying to a maximum of five nights. Glasgow has approved a 5% levy from January 2027, while Aberdeen is due to introduce a 7% levy from April 2027.
Highland Council is taking a different approach. Its proposal, currently under public consultation, would charge a fixed £5 per room or area per night for hotels, guest houses, B&Bs and self-catering accommodation. Hostels, campsites and caravan parks would face a proposed £2 nightly charge.
The Highland scheme would operate for nine months of the year, excluding December, January and February. The council estimates that it could generate around £9 million annually, although the proposal has not yet been approved. A decision is expected in December 2026, followed by an 18-month implementation period if councillors agree to proceed.
These are not yet identical systems across Scotland. The difference between a percentage-based charge and a fixed nightly amount could have significant consequences for different types of accommodation.
A fixed £5 charge, for example, represents a larger proportion of the price of a cheap room than an expensive one. A percentage-based charge rises with the price paid by the customer.
The Highland proposal also raises questions about how the fixed amount will affect single-room B&Bs, larger guest houses and self-catering properties of different sizes.
Who really pays?
Legally, the visitor levy is intended to be a charge on the overnight stay, not a new business-rates bill. In principle, the visitor pays it and the accommodation provider collects and passes on the money.
But the economic effect is not necessarily so straightforward.
If a business adds the levy to its advertised price, the total cost to the customer rises. Some visitors may simply accept the increase. Others may choose cheaper accommodation, shorten their stay or select a destination where the overall cost is lower.
If competition makes it difficult to pass on the full amount, the business may have to absorb some of the cost through a lower room rate or reduced profit.
The accommodation provider also has to explain the charge, maintain appropriate records, submit returns and deal with customer queries. Highland's proposed scheme would allow providers to retain 5% of the levy collected to help cover administration costs, but that does not necessarily mean every business's actual administrative expense would be fully covered.
For larger operators, the additional work may be relatively straightforward. For a small B&B run by one person or a couple, even a modest new administrative responsibility can be significant.
There is an important distinction here. The levy is not automatically a tax on the accommodation business's profits, but its introduction can still affect competitiveness and the cost of running the business.
Why this matters in Caithness and Sutherland
Tourism is important to many Highland communities, but its benefits depend on visitors being able to find places to stay and spend money locally.
Small B&Bs, guest houses, self-catering properties, hotels, campsites, restaurants, cafés and pubs form part of the same visitor economy. A visitor who cannot find suitable accommodation may choose another destination. Someone who stays locally is more likely to spend money in nearby shops, attractions and restaurants.
The effect can be particularly significant in rural areas, where a relatively small number of businesses may account for a substantial part of the local visitor offer.
A B&B owner may already be dealing with higher heating costs, insurance, laundry, food and maintenance expenses. The business may have a short summer season that must help cover costs throughout the year.
The Highland proposal would exclude the three winter months, which recognises some of the seasonality of tourism. However, businesses would still need to collect the levy during the other nine months, including periods when demand may be relatively weak.
The question is whether the revenue generated will produce improvements that visitors and residents can actually see, such as better public toilets, improved paths, parking facilities, waste management and support for local events.
If visitors are asked to pay more, the benefits need to be visible and credible.
Can the system be made fairer?
There are arguments for supporting pubs specifically. They may be under particular pressure and often provide a social function that cannot easily be replaced.
There are also arguments for visitor levies. Tourism creates demands on roads, public facilities, waste services and the natural environment. Asking overnight visitors to contribute towards those costs can be a reasonable approach.
But the two policies need to be considered together.
If governments offer one part of hospitality additional assistance while other businesses face higher costs and new administrative responsibilities, they should be able to explain why the differences are justified.
Scotland's councils should also be clear about how levy income will be allocated, how its impact on visitor numbers and accommodation businesses will be measured, and how smaller operators can participate in decisions about spending.
Highland Council's indicative proposal allocates 50% of net revenue to visitor management, infrastructure and services, 15% to community-led initiatives, 20% to culture, heritage and events, and 15% to business development, skills and workforce support. These are proposed priorities, not yet a record of money spent.
A levy that improves facilities, supports communities and makes destinations more attractive could benefit the visitor economy over time. A charge that increases costs without producing visible improvements would be much harder to justify.
The fairest approach may not be to give every business exactly the same percentage of rates relief or to abandon visitor levies altogether. It is to assess the combined impact on businesses of different sizes, make the rules proportionate, and demonstrate that the money collected produces real benefits.
A pub may be the heart of a village, but a B&B may be one of the reasons visitors come to the village in the first place. Both can support jobs, local spending and community life.
If governments want a thriving visitor economy, they need to look beyond individual tax measures and consider the combined effect of business costs, rates relief and visitor charges. Supporting one part of hospitality while overlooking the pressures on another risks weakening the very local economies they want to protect.