The Building Safety Levy (the Levy), described by Government as a tax on new residential buildings, will come into effect in England on 1 October 2026.
With a target of raising £3.4 billion over approximately 10 years, the Levy is not just payable on higher-risk buildings but will apply to all new dwellings (subject to certain exceptions).
Draft secondary legislation has now been published in the form of The Building Safety Levy (England) Regulations 2025, alongside detailed guidance notes. These provide the clearest picture yet of how the Levy will function, pending parliamentary approval.
This article sets out how the Building Safety Levy will operate in practice, including which developments are chargeable or exempt, how the levy will be calculated and collected, and what developers need to prepare for ahead of its implementation.
When does the Building Safety Levy charge apply?
The Levy charge will apply when there is a building control application which either creates or increases "residential floorspace".
This may be:
- a new building which includes residential floorspace;
- an existing building which includes residential floorspace where previously it had none (whether by extension or change of use); or
- an existing building with an increased total area of residential floorspace (whether by extension or change of use).
Which asset classes are included within the scope of the Building Safety Levy?
Major residential developments
This refers to developments of 10 dwellings or more including Purpose-built student accommodation (PBSA) and Build-to-Rent (BtR).
Build-to-Rent developments
These are not expressly referred to in the draft regulations, but will be picked up where they fall within the above definition.
Purpose-built student accommodation
As expected, the threshold for the application of the Levy to PBSA is 30 bedspaces.
Senior living / retirement accommodation
Included unless it falls within the definition of "supported housing".
Which asset classes are excluded from the scope of the Building Safety Levy?
Residential developments of nine or fewer dwellings
However, a development of 10 or more new dwellings will trigger application of the Levy, regardless of the number of exempt dwellings (see below) which that development includes (although exempt dwellings will not themselves be included in the Levy charge).
The Levy cannot be avoided by submitting multiple applications for building control approval for a single site, each for fewer than 10 dwellings, if the planning permission to which those applications relate is for more than 10 dwellings.
Social housing and supported housing
Although communal space for residents may be subject to the Levy charge, depending on for whose benefit it is provided and if it is shared with other occupiers
Hotels, children's homes, domestic abuse shelters, criminal justice and military accommodation, and care / nursing homes
Please note there is a full list of exempt buildings in Schedule 1 to the Regulations.
Who are "exempt persons" under the Building Safety Levy regulations?
Non-profit registered providers of social housing, and their wholly-owned subsidiaries
If the person who is liable to pay the Levy is an exempt person, then anything developed by that person will not incur a Levy charge (even if the development would normally be charged were it built by someone else).
However, joint ventures (JVs) are not exempt unless each party in the JV is exempt (so a JV between a developer and a registered provider would not be an exempt person).
How the Building Safety Levy is calculated: rates, floorspace and discounts
The rates were published earlier this year (as described in our earlier insight on the Levy) and are now set out in Schedule 3 to the Regulations.
Some key details include:
- The rates are set per square metre and the charge is calculated on the floorspace of the development.
- Floorspace is measured using Gross Internal Area (GIA), as set out in the RICS Code of Measuring Practice (6th Edition).
- There is a 50% discount for development on previously developed land (PDL), to reflect the often higher cost of developing this type of land. PDL is defined as land which has had a building on it at any point since July 1948 (excluding buildings used for agriculture). For the discounted rate to apply, at least 75% of the consented site must be PDL.
- Communal areas – areas used wholly or mainly by residents of the chargeable units – are included within "chargeable floorspace". Areas that are designed to be used wholly or mainly by the general public are excluded.
- Every three years, beginning in year two of the Levy, the Secretary of State will review "the levy rate and proposed exclusions, taking into account actual levy revenue flow, updated evidence on the anticipated total cost of remediation, and broader economic and housing market circumstances."
Building Safety Levy payment timelines and developers responsibilities
The guidance (at Annex A) has a series of helpful flowcharts which illustrate how the Levy calculation and payment process will play out in various situations.
The process will differ depending on whether a higher-risk building is involved or not, and depending on which entity is responsible for building control: (the local authority (LABC); a private sector registered building control approver (RBCA); or the Building Safety Regulator (BSR)).
The key points to note include that:
- Local authorities have collecting authority responsibility for the buildings located within their area even where building control is carried out by RBCAs or the BSR.
- A developer must supply information to allow the collecting authority to calculate the Levy charge with its building control application, and also subsequently with its commencement notice. Information must be supplied even if the development does not meet the conditions for charging (e.g. it comprises exclusively social housing) and so clients will need to build this into their processes.
- Applications for building control approval can be rejected, whichever route applies, if the required Levy information is not provided.
- Following this the collecting authority will have five weeks to calculate the levy charge and issue a levy liability notice to the developer, or a "notice of no charge" (if the development does not meet the conditions for charging the Levy).
- Liability for payment lies with the "named client" in the building control application.
- There is no fixed time limit for payment; the levy can be paid at any point between receiving the levy liability notice and notifying the local authority of completion. The collecting authority will issue a payment certificate. Once works are complete, the developer will notify the building control authority in the usual way, who will check that the levy has been paid and then issue a building control completion certificate.
- Whichever building control route applies, a completion certificate will not be issued by the relevant building control authority if the Levy has not been paid.
Will transitional arrangements apply to the Building Safety Levy rollout?
The draft regulations do not contain any formal transitional provisions.
The current position is therefore that building control applications (which include (a) applications with full plans made to LABC; (b) initial notices given to a local authority by a RBCA; and (c) higher-risk building applications submitted to the BSR) before 1 October 2026 – assuming they are not later rejected – will not be subject to the levy.
This is the case even if they are formally varied after that date. This may lead to a surge in applications before the deadline.
However, it is important to note that if works have not reached the point of "commencement" (as defined in the Building Act 1984 and its various secondary legislation) within three years, then the relevant building control application may lapse. Therefore submitting an application or Initial Notice before 1 October 2026 will not preserve the position indefinitely if works are not substantively commenced within three years.
Building Safety Levy compliance: key takeaways for developers and stakeholders
The Levy represents a significant shift in how the remediation of building safety defects is funded. With detailed draft regulations and guidance now available, developers and stakeholders must prepare for its implementation and start considering its implications in planning and financial models. For tailored advice to determine how the Levy is likely to impact your business, please contact Gemma Whittaker, Julia Dacre Field or Dan Leather.
As explained above, the calculation of the Levy will come relatively late in the development cycle (unlike the Community Infrastructure Levy (CIL) or other planning gain costs, for example, which are typically ascertained at a much earlier stage). Coupled with the possibility of changes in the Levy rate upon its three-yearly review by the Secretary of State, this could present a challenge to traditional deal structuring and pricing methods.
Equally, the frequency of the review, and the factors influencing the Levy rate, may introduce uncertainty for developments that span a review period. Clients will need to factor this into their development appraisals.
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