James So
- Solicitor
- Construction
What is it?
The Building Safety Levy (England) Regulations 2025 (the “Regulations“), coming into force on 1 October 2026, introduce the Building Safety Levy, which as the name suggests is a tax, specifically on certain new residential buildings.
The aim of the Building Safety Levy is to raise £3.4 billion over the next 10 years to remedy building safety defects across England in what is effectively a rebalancing of responsibilities since those that will be required to pay the Levy will not necessarily have been responsible for any historic building safety failures.
Levy charging conditions
All charging conditions will need to be met before a residential building will incur a levy charge.
Charging condition 1 – The works must constitute or form part of a “major residential development”. A major residential development is a development of 10 new dwellings or more, or 30 new bedspaces or more for a purpose-built student accommodation (PBSA). This condition will also catch Build-to-Rent projects, and senior living and retirement accommodation unless caught by the supported housing exemption (below).
Charging condition 2 – The works must result in the creation of new “residential floorspace” which means new dwellings, new PBSA and new communal areas used in those buildings. This charging condition would capture:
- A new building being constructed which includes residential floorspace;
- An existing building with no residential floorspace being converted to create residential floorspace; or
- An existing building which has some residential floorspace having additional residential floorspace created, either through extension or conversion.
Charging condition 3 – The client should not be an exempt person. An exempt person is defined in the regulations as a non-profit registered provider of social housing (or its wholly owned subsidiary). All of their work is exempt. This is because such providers reinvest profits from housing sold or rented on the open market back into their social housing provision.
Are there any exclusions?
To avoid unnecessary penalisation or hindering the delivery of important community facilities, certain residential developments are exempt from paying the levy.
- Social Housing – this includes most affordable housing and supported housing.
- Exempt Buildings – Schedule 1 of the Regulations sets out the exempt buildings which include:
- School accommodation
- Care homes
- Prisons
- Hospitals
- Hotels
- Temporary accommodation for homeless people
What about existing applications?
The levy will not apply to existing applications for new dwellings or PBSA submitted before 1 October 2026, even if that application is subsequently varied after the implementation date.
How is the levy calculated?
The levy is charged per square metre of new residential floorspace including communal areas which are used by the occupants of a non-exempt dwelling or PBSA.
The levy rates for each local authority are set out in Schedule 3 of the Regulations. These can vary greatly with buildings in Kensington and Chelsea incurring a levy rate of £100.35 per square metre while buildings in County Durham will only incur a levy rate of £12.30.
It is also worth noting that chargeable developments which are constructed on previously developed land, sometimes known as brownfield land will be charged 50% of the levy rate. For the discount to apply 75% or more of the site needs to fall within the definition of previously developed land.
Process and timing
When submitting a building control application, regardless of route (LA, BSR, RBCA), levy information must be provided with further levy information provided at the first commencement notice stage. Local authorities have 5 weeks (or 8 weeks if spot checks are being conducted) to assess and issue a levy liability notice or a notice of no charge and are required to carry out spot checks on a minimum of 10% of levy information submissions.
Where a development is an exempt class of building under Schedule 1, levy information is not required to be submitted with the application for building control approval, and the collecting authority is not required to issue a notice of no charge.
The full levy amount must be paid before the earlier of the completion notice date and the first date of occupation. A completion certificate will not be issued by the relevant building control authority if the levy is not paid.
Dispute it
A request to review the levy charge from the local authority can be made. The review request has to be made in writing within 28 days from the date the levy liability notice is given and must contain the information prescribed by the Regulations.
The client must be informed of the outcome within 28 days from the date the review request is received including reasons for the decision. A request for further review can be made to the First-tier Tribunal within 28 days of receipt of the initial review decision on the basis of an error of fact e.g. miscalculated floor space, or error in law e.g. a levy charge was applied to exempt building.
What this could mean for developers and funders
Additional cost – Developers faced with this increased upfront cost will need to build this into viability models. Provision should also be made for increased levy rates, since these are to be reviewed every 3 years.
Timing – There might be scope for developers to accelerate schemes, particularly in higher levy rated areas, so as to ensure building control applications are made before 1 October 2026 deadline.
Design considerations – Developers of schemes with large communal areas may consider a re-design of the size and extent of shared spaces as reducing communal areas would also reduce chargeable residential floorspace.
Summary
The Building Safety Levy will be a material cost for many residential developments from 1 October 2026. Although the Levy is targeted and subject to a range of exemptions, its scope and variable regional rates will require careful consideration in assessing viability of projects, as well as informing design and programme decisions.
This article is for general information purposes only and does not constitute legal advice or a comprehensive statement of the law. Specific legal advice should always be sought in relation to individual circumstances.
Meet the team: