If you have ever checked out of a hotel and wondered why the bill looks higher than the price you saw online, you are not alone. Is there VAT on hotel rooms? Yes, in almost every case, the answer is yes.
This guide breaks down exactly how VAT works on hotel stays, why it applies, and how businesses can reclaim it. We will also cover common mistakes people make when booking or claiming back tax on accommodation.
Is There VAT on Hotel Rooms? The Short Answer
Hotel accommodation in the UK is taxed at the Standard Rate VAT of 20 percent. This applies to almost every type of overnight stay, whether you are on holiday, travelling for work, or booking rooms for staff.
Many people assume hotel stays should be treated like renting a flat, which is often VAT exempt. But hotel vat rules do not work that way. A hotel room is a short-term service, not a long-term home, so it gets taxed differently.
Why Hotel Rooms Carry VAT
Hotel Accommodation is treated as a taxable supply under UK tax law. HMRC classes it as part of the Hospitality Industry, alongside restaurants, pubs, and event venues. These businesses provide a service rather than a place to live, so the government taxes the spending as it would any other commercial transaction.
Long-term rent is different because it covers a basic need. A two-night hotel stay is treated as discretionary spending, so vat on hotels applies at the full rate.
A Quick History Lesson
The rate has not always sat at 20 percent. During the pandemic, the government dropped the rate to 5 percent to help hotels survive lockdowns and travel bans. It rose to 12.5 percent in late 2021, then returned to the full 20 percent in April 2022. Since then, the rate has stayed the same, and there is no confirmed plan for another cut. Any future change would come through a Budget announcement, not a quiet policy shift.
How VAT Shows Up on Your Hotel Bill
When you book a room for £120 a night, that price usually already includes VAT. The hotel does not add it on top at checkout in most cases. Instead, the tax is baked into the price you see.
Here is how the maths works:
- Room price shown: £120 (this includes VAT)
- VAT portion: £20
- Net price before tax: £100
Most hotels will list the VAT amount separately on your final invoice. If you plan to claim it back through a business, always ask for a full VAT invoice with the hotel’s VAT registration number on it.
What Counts as Part of the Taxable Room Charge
Vat in hotels does not stop at the bed and the walls. Several extras usually carry the same 20 percent rate:
- Breakfast included in the room rate
- Parking charges billed by the hotel
- Conference or meeting room hire
- Room service and mini bar items
Some extras, like certain spa treatments or standalone catering contracts, can follow different rules. If a hotel bundles services together, ask for a clear breakdown before assuming everything is taxed the same way.
Can Businesses Reclaim VAT on Hotel Stays?
This is where things get more useful for business owners. A VAT-Registered Business can usually reclaim VAT paid on hotel stays booked for genuine business travel. This includes stays for employees attending meetings, training, or site visits.
There are limits, though. VAT on hotel stays for client entertainment is generally not reclaimable, even if the stay is booked through the company. HMRC draws a firm line between staff travel and hospitality for clients.
What You Need to Reclaim VAT
To claim back hotel vat tax, your business needs:
- A full VAT invoice, not just a receipt
- The hotel’s VAT registration number on the document
- Clear proof the stay relates to business activity
- Records kept for at least six years, in line with HMRC rules
Booking through third-party travel sites can make this harder. Some platforms do not issue proper VAT invoices, which means the VAT cannot always be recovered. If your team travels often, it is worth booking directly with hotels or using a corporate travel account that provides compliant invoices.
Common Mistakes Businesses Make
We see the same errors again and again when reviewing client expense claims:
- Claiming VAT on client entertainment stays by mistake
- Missing the VAT number on an invoice, which blocks the claim
- Assuming overseas hotel VAT works the same as UK VAT
- Forgetting that flat rate scheme users often cannot reclaim VAT the normal way
Overseas VAT is a common trap. If your employee stays in a hotel abroad, that country’s tax rules apply, not the UK’s. Recovering foreign VAT usually means going through a separate refund scheme, and not every country allows it.
If Your Business Uses the Flat Rate Scheme
Businesses on the VAT Flat Rate Scheme pay a fixed percentage of turnover instead of tracking VAT on every purchase. This often means you cannot reclaim VAT on hotel stays in the usual way, which can make business travel more expensive than expected. It is worth reviewing whether the flat rate scheme still suits your business if travel costs are rising.
The 28-Day Rule for Hotel Stays
If a guest stays in a hotel or similar establishment for more than 28 consecutive days, the VAT treatment changes from day 29 onwards. The rule reduces the taxable value of the accommodation, but it does not make the entire stay VAT-free.
How Does the 28-Day Rule Work?
For the first 28 days, hotel accommodation is normally subject to 20% VAT. From day 29, the accommodation element can benefit from the reduced value rule.
The key points are:
- Days 1–28: VAT is normally charged at 20% on the relevant accommodation supply.
- Day 29 onwards: the accommodation element can become VAT-exempt.
- At least 20% of the accommodation charge must be treated as facilities/services and remains subject to 20% VAT.
- Meals and other separately taxable services remain subject to their applicable VAT treatment.
The rule can apply to hotels, inns, boarding houses and similar establishments, but it does not automatically apply to every type of holiday or residential accommodation.
Simple Example
Suppose a hotel charges £500 per week excluding VAT, made up of:
- Room: £350
- Meals: £150
During the first 28 days:
- Room VAT: £350 × 20% = £70
- Meals VAT: £150 × 20% = £30
- Total VAT = £100
From day 29, assuming the reduced value rule applies:
- Facilities: £350 × 20% = £70 → £14 VAT
- Accommodation: £280 → £0 VAT
- Meals: £150 → £30 VAT
- Total VAT = £44
This reduces the VAT charged on the weekly bill from £100 to £44.
Common Mistakes to Avoid
Hotels should take care not to:
- Charge 0% VAT on the entire room charge after day 28.
- Ignore the 20% minimum facilities element.
- Restart the 28-day calculation incorrectly where HMRC considers the accommodation to be a continuous stay.
- Apply the rule to accommodation that does not qualify, such as certain holiday lets.
- Fail to keep records of check-in/check-out dates, long-stay arrangements and invoices.
What Should Hotels Record?
Keep clear evidence of:
- Guest arrival and departure dates
- The nature of the long-stay arrangement
- Accommodation and facilities charges
- VAT calculations and invoices
- Any periods of absence that may affect continuity
In short: the 28-day rule does not eliminate VAT from a long hotel stay. From day 29, it can reduce the taxable value of the accommodation while VAT continues to apply to the facilities element and other taxable services.
If you’re unsure whether a guest’s stay qualifies, check the specific HMRC VAT rules before changing your invoicing or VAT return treatment.
Holiday Accommodation vs. Hotel Accommodation: Key VAT Differences
Hotels, holiday lets, Airbnb properties and serviced apartments can have different VAT rules. The key factor is how the accommodation is classified and supplied, not simply how it is advertised or booked.
| Accommodation | VAT treatment | Key point |
|---|---|---|
| Hotels | Usually 20% VAT | Standard-rated accommodation. |
| Holiday accommodation | Usually 20% VAT | Remains standard-rated, even for longer stays. |
| Airbnb holiday lets | Usually 20% VAT if taxable | Airbnb itself does not determine the VAT treatment. |
| Serviced apartments | Depends on the supply | Treatment depends on how the accommodation operates. |
| Hotel stays over 28 days | Special rules may apply | VAT can be reduced on the accommodation element from day 29. |
Airbnb and Holiday Lets
Being listed on Airbnb does not automatically determine your VAT position. If the property is supplied as holiday accommodation, it will generally be standard-rated. The purpose and nature of the accommodation matter more than the booking platform.
Serviced Apartments
Serviced apartments need careful classification. Where they operate similarly to a hotel, including temporary accommodation and hotel-style services or facilities, the hotel rules may apply. The exact setup should therefore be reviewed before deciding the VAT treatment.
What Happens With Long Stays?
For hotels and similar establishments, a special VAT rule can apply when a guest stays for more than 28 consecutive days. From day 29, VAT is generally calculated on the charge for facilities and services rather than the qualifying accommodation element.
Importantly, this does not apply to holiday accommodation. Holiday accommodation remains standard-rated regardless of how long the guest stays.
Bottom line: Don’t assume that every short-term rental follows the same VAT rules. Correctly classifying your accommodation can help you charge the right VAT and avoid errors on your VAT returns.
What Happens During an HMRC Check
HMRC often reviews travel and subsistence costs closely during VAT inspections. Hotel invoices are a common area for errors, mostly by accident rather than on purpose.
Clear records make these checks far easier. Keep every VAT invoice, note the business reason for each stay, and separate client entertainment from staff travel from the start. Businesses that stay organised rarely run into trouble here.
Need Expert VAT Advice for Your Hotel Business?
Managing VAT in the hotel industry can be complex, especially when dealing with room charges, business travel, staff accommodation, and HMRC compliance. We specialise in supporting hotels, guesthouses, serviced apartments, and other hospitality businesses with expert VAT advice tailored to the sector. Whether you need help with VAT registration, submitting accurate VAT returns, reclaiming eligible VAT, or ensuring your business remains fully compliant with HMRC requirements, our experienced hospitality accountants are here to help. Contact us today to simplify your VAT obligations and keep your hotel business running efficiently.
Final Thoughts
So, is there VAT on hotel rooms? Yes, almost always, at the standard 20 percent rate. The bigger challenge for most people is not the tax itself, but getting the paperwork right so businesses can claim it back properly. Getting this wrong is common, but it is also avoidable with the right advice.
At FA Accountants, we help hospitality businesses and companies with frequent business travel manage VAT correctly, from registration through to reclaiming costs on staff hotel stays. If you want to make sure your VAT position is accurate and your claims hold up under HMRC scrutiny, Contact us today for a straightforward VAT review.
Frequently Asked Questions About VAT on Hotel Rooms
Can you claim VAT if you book through Airbnb or Booking.com?
Yes, potentially. The booking platform does not determine whether VAT can be reclaimed. Your business must be VAT registered, the accommodation must be used for business purposes, and you need valid VAT evidence showing the VAT charged.
What’s the difference between 0% VAT and VAT exempt?
Zero-rated (0%) supplies are taxable supplies, so VAT is charged at 0% and they generally count towards VAT registration thresholds. VAT-exempt supplies have no VAT charged and are treated differently for VAT recovery and registration purposes.
Do I need to register for VAT if I run an Airbnb?
Not necessarily. VAT registration depends on your taxable turnover and the nature of your accommodation business. Holiday accommodation can be taxable, so monitor your turnover against the current VAT registration threshold.
Can I reclaim VAT on hotel meals separately from the room?
If your business is VAT registered, VAT on qualifying business meals may be reclaimable where the expense is incurred for business purposes and you have a valid VAT invoice. Private or non-business expenses are not normally recoverable.
What happens if the hotel doesn’t give me a VAT invoice?
Ask the hotel for a VAT invoice or suitable VAT evidence. Without valid VAT evidence, you may not be able to reclaim the VAT. Keep booking confirmations and receipts as supporting records, but they may not replace a proper VAT invoice.
Is there VAT on hotel deposits or cancellation charges?
It depends on what the payment represents and the hotel’s contractual terms. A deposit may be treated differently from a cancellation charge, so the VAT treatment should be checked rather than automatically applying 20%.