Is There VAT on Hotel Rooms?

If you’re booking a hotel for work or leisure, or you manage property accommodation as a business, it’s important to understand how VAT applies to hotel stays in the UK. In most cases, hotel rooms are subject to the standard 20% VAT rate, and whether you’re a customer or a business owner, this can affect pricing, billing and reclaimability.

This guide explains how VAT works on hotels, holiday lets, Airbnb properties, and overseas accommodation, along with how and when VAT can be reclaimed.

VAT on Hotel Rooms – What Should You Expect?

VAT is charged on overnight accommodation in hotels, inns, guesthouses and similar establishments. This includes:

• Room charges

• Service fees

• Breakfast or meal packages (unless itemised separately)

The current standard VAT rate is 20%, and this is typically included in the price you see when booking. Businesses that supply hotel accommodation must be VAT registered if their taxable turnover exceeds the registration threshold (£90,000 as of 2024–25).

VAT Rates on Accommodation and Hotel Rooms

Accommodation supplied in the UK is usually standard-rated for VAT at 20%, including:

• Hotels and motels

• B&Bs and guesthouses

• Serviced apartments with hotel-like amenities

• Conference facilities that include overnight stays

• Short-term business accommodation

For holiday accommodation, including holiday homes, holiday parks, and cottages, the same VAT rules apply if the property is let commercially.

From July 2020 to March 2022, there were temporary reduced VAT rates for the hospitality sector (5% and later 12.5%) due to COVID-19, but these have now ended, and the rate has returned to 20%.

VAT on Holiday Lets

If you operate furnished holiday lets and meet the conditions to be classed as a business (e.g. availability, frequency of occupation and level of service), then your income is subject to VAT if you exceed the registration threshold.

You’ll need to:

• Register for VAT

• Charge VAT on your bookings

• Provide VAT invoices on request

• Submit regular VAT returns

If your holiday let business stays below the threshold, you don’t need to register unless you choose to voluntarily.

VAT on Airbnb Property Lettings

Airbnb hosts must consider VAT when letting out properties as a business. If your UK rental income from short-term lettings exceeds £90,000, you must register and charge VAT at 20%.

This applies to:                 

• Whole property lets

• Room-only bookings

• Short-term stays provided to guests (rather than long-term tenancies)

Airbnb hosts who are VAT registered must issue VAT invoices to guests or the platform (if acting as the supplier), and include VAT in their pricing.

How Can VAT Be Recovered?

If you’re a VAT-registered business, and you book hotel accommodation for business use (such as staff travel or client events), you can reclaim the VAT on your VAT return.

To reclaim VAT on hotel stays, you must:

• Have a valid VAT invoice showing the supplier’s VAT number

• Prove the stay was for business purposes

• Not include personal or non-business use

For employee travel, accommodation must relate to necessary business activity, not leisure.

Accommodation Abroad

UK VAT does not apply to accommodation outside the UK, even if booked from the UK. However, foreign hotel bills may include local VAT or sales tax, and this is not reclaimable through your UK VAT return.

Some countries offer foreign VAT refund schemes for UK businesses, but the process is complex and requires direct application to the overseas tax authority.

Other Business Expenses and VAT

In addition to accommodation, VAT may also apply to:

• Meals and room service (if itemised)

• Meeting room hire

• Travel expenses (e.g. taxi or parking with VAT receipts)

Note that entertainment-related costs such as alcohol or client hospitality are generally not eligible for VAT recovery.

Final Thoughts

Hotel stays in the UK are standard-rated at 20% VAT, whether booked by individuals or businesses. If you're a business and the accommodation is for genuine work purposes, the VAT can usually be reclaimed as long as you keep proper documentation.

For property owners, including holiday let and Airbnb hosts, VAT becomes an issue once your income exceeds the threshold. You must then register, charge VAT, and handle your obligations with HMRC.

Understanding how VAT applies to accommodation can help you budget accurately, price services correctly, and reclaim what you're entitled to as a business.