The UK Government has recently published its official response to the Building Safety Levy Technical Consultation, outlining next steps for implementing the new levy, aimed at funding the remediation of unsafe buildings.
This article breaks down the key points and implications for SME property developers, helping them to stay informed and maintain project viability.
What is the Building Safety Levy?
The Building Safety Levy is a financial charge introduced under the Building Safety Act 2022. Its purpose is to ensure that developers contribute to the remediation of unsafe buildings, particularly those with cladding issues, in the wake of the Grenfell Tower tragedy.
Key details from the Government’s response
- Implementation timeline: The levy is set to come into effect in Autumn 2026, providing developers with an 18-month window to prepare and incorporate the levy into their financial planning.
- Scope of application: It will apply to all new residential buildings in England that require building control approval, including purpose-built student accommodations.
- Exemptions: Certain developments are exempt, including:
- Affordable housing
- Care homes
- NHS facilities
- Developments of fewer than 10 units
- Calculation method: The levy will be calculated based on the gross internal area (GIA) of the development, with rates varying by local authority and whether the land is previously developed.
- Collection process: Local authorities will act as the collecting agents, integrating the levy into the existing building control process.
What are the implications for SME developers?
- Financial planning: Incorporate the levy into your project budgets early, especially for developments exceeding 10 units. Understanding the potential costs will help in assessing project viability.
- Project viability: The levy could impact the overall profitability of your projects. It’s essential to reassess financial models to ensure that developments remain financially sound.
- Site selection: Consider focusing on smaller developments or those that fall under the exemption categories to mitigate the impact of the levy.
- Engage with Local Authorities: Stay informed about how your local authority plans to implement the levy, as rates and processes may vary.
Frequently asked questions
How should I prepare for the Building Safety Levy?
It’s advisable to begin incorporating potential levy costs into your financial planning and project timelines now to ensure compliance and maintain project viability.
What is the process for paying the levy?
The levy will be integrated into the existing building control process and collected by local authorities. Payment will be required at specified stages of the development process.
What are the consequences of non-payment?
Failure to pay the levy will result in the withholding of the building control completion certificate or rejection of the final certificate, effectively preventing the sale or occupation of the building.
Do I need to pay the levy for conversions or changes of use?
Yes, the levy also applies to change-of-use developments that result in the creation of new residential units, such as converting an office into flats.
Is the levy deductible or recoverable for tax purposes?
While the Building Safety Levy is a mandatory cost of development, whether it is tax-deductible or recoverable will depend on your specific circumstances and how your business is structured.
What happens next?
With the Government’s response to the Building Safety Levy Technical Consultation now published, the policy is progressing toward implementation, with the following key steps expected:
Draft regulations and legislation
The Government will develop and lay secondary legislation under the Building Safety Act 2022 to formally establish the levy. This legislation will set out the operational details, including how the levy will be assessed, collected, and enforced. Draft regulations are expected to be shared for stakeholder feedback before being finalised.
Further engagement with local authorities
Since local authorities will act as the collecting agents, the government will work closely with them to develop the necessary administrative systems, including tools for levy calculation, integration into building control workflows, and appeals or refund mechanisms. This is crucial to ensure a smooth rollout across England.
Publication of final rates and guidance
Ahead of the Autumn 2026 launch, the Department for Levelling Up, Housing and Communities (DLUHC) will publish:
- The final levy rates by local authority
- Detailed implementation guidance for developers and local planning authorities
- Templates and forms for use within the building control application process
Developer preparation period
Developers have an 18-month lead-in period to prepare. During this time, you should:
- Monitor updates from DLUHC and local councils
- Review your portfolio for projects that may be liable
- Update feasibility and viability models
- Seek professional advice on financial, legal, and tax implications
Potential for further policy updates
Given the complexity and scope of the levy, the government has indicated it may review the scheme at regular intervals post-implementation, including reassessing the impact on housing delivery, especially for SME developers.
Support for SME developers
The Building Safety Levy represents a significant shift in the property development landscape. For SME developers, understanding and preparing for this levy is essential to ensure continued success in future projects.
The CrowdProperty team is here to support you through these changes, offering expert guidance and flexible financing solutions tailored to your needs to help you navigate these changes effectively.
For more detailed information, refer to the full government response to the Building Safety Levy technical consultation: Building Safety Levy: Technical consultation response.
Do you need help navigating the Building Safety Levy? Contact our property experts today to assess your project’s viability and explore tailored funding solutions.