Scottish Building Safety Levy and what it means for residential development

The Building Safety Levy (Scotland) Bill (the Bill), introduced on 5 June 2025, establishes a new building safety tax - referred to as the Levy - which is charged upon acceptance of a completion certificate for a new residential unit.

This is the Scottish equivalent of the Building Safety Levy expected to come into force in England in Autumn 2026. The aim of the Levy is to fund the remediation of unsafe cladding in existing buildings and to enhance overall building safety in Scotland. The Scottish Government anticipates it will generate approximately £30 million annually.

The Bill outlines when the Levy is charged, which buildings are taxable, who pays it, and exemptions. It also details how to calculate the Levy and allows the Scottish Government to set its rate. As a framework bill, much of the operational detail - including rates and penalties - will be set out in secondary legislation. The Bill is also subject to change as it progresses through the Scottish Parliament.

The Levy is expected to apply from 1 April 2027, meaning that developments currently being structured may be affected. This could have a material impact on the viability of residential development in Scotland moving forward.

Liability

The person liable to pay the Levy is the building owner at the time of either:

• (a) submission of a completion certificate to the verifier, or
• (b) application for the grant of temporary occupation.

This shifts the financial burden from homeowners to residential developers, effectively making it an additional cost to be factored into new residential projects. While this aligns with broader policy objectives, it introduces a new viability consideration for developers.

When will the Levy be charged?

The Levy becomes due when a completion certificate is accepted or temporary occupation permission is granted. The Bill provides for payments to be calculated in the accounting periods for a financial year - ending on 31 March unless otherwise set by Scottish Ministers - and to take into account the developer’s levy-free allowance and applicable reliefs.

A worked example is given in the explanatory notes for the Bill.

During consultation, developers raised concerns about cash flow timing. Significant upfront investment is required to acquire land, install infrastructure, and construct homes. Developers often only realise profit near project completion, so early-stage Levy payments could render some developments unviable.

Properties included

The Levy applies to new units that are used or are “intended to be used as a dwelling or other accommodation”. Of note is that the Bill specifically provides that intended use includes residential accommodation for students and for occupation by tenants. 

Exemptions

To ensure that that Levy doesn’t exacerbate the challenges to disadvantaged housing sectors, not all residential development will be subject to the Levy including:

• Affordable housing: Consistent with its commitment to building 110,000 affordable homes by 2032, housing delivered through the Scottish Government’s affordable housing supply programme will be exempt from the Levy.
• Social housing: Housing that is to be let under a secure tenancy by any party such as a local authority, registered social landlord or private developer will also be exempt. 

Reliefs

If passed in its current form, the Bill gives the Scottish Ministers delegated powers to make regulations in which they:

• Provide for a levy-free allowance for all developers – the detail remains to be seen but it is envisaged that this could be used to protect smaller developers from the Levy.
• Set (and vary) different rates for different local authority areas and types of land. This approach could enable the Scottish Government to establish a lower rate for brownfield sites to promote sustainable re-use, aligning with the English Building Safety Levy.
• Set reliefs for certain residential development. It is worth noting that on its face the Bill includes build to rent (BTR) developments, but the Policy memorandum for the Bill indicates that the Scottish Government views BTR developments as more suited to be treated by relief than exemption.

Calculation

The Bill provides that the Levy shall be calculated based on the square meterage of the floorspace. Essentially, this involves applying the relevant levy rate, an unknown at this stage, to the floorspace area - measured in square metres - and multiplying accordingly.

During the consultation process, several methods for calculation were proposed, including calculating the Levy as a percentage of the market value of the property and implementing a flat rate levy.

While a flat-rate levy would have offered certainty, it may have been counterproductive by potentially deterring the development of smaller, more affordable homes.

The Bill sets out a process for calculating the Levy due for each accounting period.

Collection

The Levy will be collected and managed by Revenue Scotland – compared with the equivalent for development in England, which will be collected by Local Authorities.

Developers will have a duty to register with Revenue Scotland who will establish a register of residential property developers for the purposes of collecting and managing the Levy.

Penalties

Penalties will apply, for instance for the failure to make a return, failure to pay and failure to register. Penalty rates are unknown at this stage and are expected to be set in secondary legislation.

It appears that enforcement will not go so far as to withhold or reject a completion certificate because of non-compliance.

Timings

The Levy is expected to apply from 1 April 2027, though this is not confirmed. Its duration is also uncertain. Industry stakeholders have called for a sunset clause to provide certainty, suggesting a maximum term of 10 years.

This opens the door to several questions: Could the legislation include a provision to end the Levy once all cladding assurance register entries are remediated? And on the flip side, what if the Levy ends before remediation is complete?

As a framework bill, much of the detail (e.g. levy rates, penalties, reliefs) will be set out in regulations after the Bill becomes law and we therefore do not yet have the complete picture.

What is clear is the fine balance required between raising funds for essential cladding remediation and avoiding further harm to Scotland's housing sector during a housing crisis.

A clear understanding of the residential development process is essential to ensure the Levy’s implementation does not impede the delivery of new homes.

The Finance and Public Administration has launched a call for views on the Bill as part of parliamentary scrutiny of the legislation, with a deadline to respond by Friday 15 August 2025.