In its Budget for 26/27 the Scottish Government confirmed that the Scottish Building Safety Levy (the Levy) - a new building safety tax to be charged on acceptance of a completion certificate for a new residential unit - will take effect on 1 April 2028.

Published: 27 January 2026
Author: Lewis Ritchie

Recognising industry concerns about the potential impact of the Levy on development viability, the government intends to provide “advance certainty”¹ by publishing the Levy rates in June 2026 (after the Scottish election in May). Scottish Budget 2026 to 2027 - gov.scot

The legislation which will create the Levy -the Building Safety Levy (Scotland) Bill (the Bill) - completed Stage 1 of its journey through the Scottish Parliament on 8 January 2026.

As a framework bill, much of the detail (e.g. levy rates, penalties, reliefs) will be set out in (still to be published) regulations meaning we do not yet have the complete picture and the details may change as the Bill progresses through Parliament. However, the key points to note at this stage are:

• the aim of the Levy is to fund the remediation of unsafe cladding in existing buildings in line with the Cladding Remediation Programme. The government anticipates it will generate approximately £30 million annually
• this is the Scottish equivalent of the levy which will apply to developments in England from 1 October 2026
• the Levy will be collected by Revenue Scotland (compared with local authority collection for developments in England)
• 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 government to set its rate. More detail is set out below

Liability

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

• submission of a completion certificate to the verifier
• 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. Hotels are not included.

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

Despite industry concerns, the government’s intention is that the levy will apply to BTR developments.

Reliefs

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 small-scale rural developments from the Levy
• set (and vary) different rates for different local authority areas and types of land. This approach could enable the 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.

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.

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

We know that, provided the Bill and relevant legislation is passed, the Levy will apply from 1 April 2028, but we do not know for how long it will last. Industry stakeholders - and even the Stage 1 Committee - called for a sunset clause to provide certainty. The government does not support a fixed end day but is looking at strengthening the reporting provisions at the Stage 2 debate (scheduled for 10 February 2026).

More details will emerge this year but what is currently 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.

[1] Scottish Budget 2026 to 2027 - gov.scot