The Building Safety Levy – New timeline and charges

The new government has confirmed that it intends to press ahead with the building safety levy proposed by the previous government (see our earlier blog), but has recently announced that its implementation will be delayed and the levy will now come into effect in autumn 2026. The government's Remediation Acceleration Plan published in December 2024 had indicated that the levy would come into effect this autumn.

The final regulations to implement the levy are still awaited, but the government has published its response to the latest technical consultation and the levy rates that will apply in each local authority area. The response also provides further detail about how the levy will operate in practice.

When will the levy apply?

The levy will be charged on all new residential dwellings (including purpose built student accommodation and build to rent properties) which require a building control application. Some types of residential building are exempt from the levy so as not to deter their development, and to protect smaller sites and enterprises. Affordable housing, non-social homes built by not-for-profit registered providers, NHS hospitals, care homes, supported housing, children’s homes, domestic abuse shelters, accommodation for armed services personnel, criminal justice accommodation, and developments of fewer than 10 units will all be exempt. Although some respondents to the consultation argued that hotels (which are often competing for land with residential schemes) should be subject to the levy, the government has determined that hotels will be exempt.

How will the levy be calculated?

Like the CIL charge, the levy will be payable on a gross internal area basis (as set out in the RICS Code of Measuring Practice 6th Edition). Communal areas will be chargeable, but where those areas are shared between chargeable and exempt areas (e.g. where a development includes an element of affordable housing), the proportion of the communal space which is equivalent to the proportion of exempt areas within the building will be exempt from the levy charge.

The rates which will apply are set out in an annex to the response (see Annex A). These vary between local authority areas to reflect variations in house prices – the highest rates being payable in Kensington and Chelsea. A 50% discount applies to the rates where the development is constructed on previously developed land (PDL).

The government has indicated that it intends to use a definition of PDL which is similar to that contained in the National Planning Policy Framework. The consultation response indicates that if 75% or more of the land within the planning permission redline boundary is classed as PDL, all development which is subject to the levy charge would qualify for the 50% discount. Some respondents to the consultation had noted the high cost of development in urban areas, which puts PDL sites closer to the viability threshold and called for a more granular method of charging the levy. However, the government considers that additional granularity would create too much complexity in calculations, adding further administrative burden to the collecting authorities.

The levy rates will not be indexed. However, the levy will be reviewed every three years, and regulations could be laid in parliament to amend the rates following these reviews in future. A separate methodology note will be published by the government to explain how the levy rates have been calculated.

If there are changes to the works during construction, updated levy information must be supplied by developers reflecting the changes which could impact levy liability, e.g. additional chargeable floorspace.

Spot checks will be carried out by local authorities against levy information submitted by developers.

What if the levy is not paid?

Developers have some flexibility over when to pay the levy charge, but it must be paid before the developer applies for the first completion certificate (for applications to the local authority or the Building Safety Regulator) or final certificate for the works (where a registered building control approver is engaged). If the levy is not paid, the building control completion certificate will be withheld or the final certificate will be rejected. This is a considerable incentive as it is an offence for residential units in higher-risk buildings to be occupied before the completion certificate is issued (and the building registered), and many lenders require completion/final certificates before agreeing to lend on a property.

If the works will involve partial/interim completion certificates, the developer will need to have paid the whole levy liability for the works specified in the building control application or notice, before any completion certificate can be issued, or final certificate accepted, for any part of the works. The government does not intend to provide for levy payments to be collected in stages. This will require capital outlay at an earlier stage in the overall project where phased works are planned.

What are the next steps?

The final regulations are due to be laid before parliament later this year. The government had previously indicated that developments which have submitted their building control application prior to the levy coming into effect will not be subject to the levy charge. Assuming the government maintains that approach, projects that submit their building control application after the levy comes into effect (planned for autumn 2026) will need to factor in the cost of the levy to their viability calculations.