Scottish Building Safety Levy Update 31 July 2026

Real Estate:Scotland acknowledges greater clarity on Scottish Building Safety Levy but warns of cost and viability pressures for the sector.

On 31 July, the Scottish Government published two important updates on the Scottish Building Safety Levy which will have major tax implications for new housing developments built on or after 1 April 2028. The Levy will be used to cover the Scottish Government’s Cladding Remediation Process which is intended to raise up to £30m annually.

1. Indicative Rates for the levy have been set

• The rates are based on floorspace per square metre using Gross Internal Area (GIA), with different rates applying to each local authority.
• Two rates will also apply depending on whether development is on brownfield or greenfield land.

2. A technical consultation published

• This consults on the methodology in calculating floorspace, the potential for further exemptions & reliefs which includes for communal areas, and options for payment flexibilities.
• It is not expected that this consultation will adjust the rates.

Responding to the publications, David Melhuish, Director of Real Estate:Scotland states:

"The publication of the indicative rates for the Scottish Building Safety Levy, to be based on floorspace and per local authority, will now give developers and investors much-needed clarity on the tax owed on residential developments completed on or after 1 April 2028. Recognition of the role of purpose-built student accommodation and build-to-rent in tackling Scotland’s housing emergency is also welcome, as is the potential to exclude communal space and provide a 50% discount for brownfield land in the latest consultation. Whilst these were key issues that we engaged with the Scottish Government on, we remain disappointed that the transitional provisions do not go far enough for developments already on site and commenced before developers were even aware of the levy.

Rectifying unsafe cladding is an immediate priority and we recognise that the Scottish Government needs to secure the funding required to address this issue. The challenge is not the need to tackle unsafe cladding but ensuring that the way it is funded does not undermine the delivery of the homes Scotland urgently needs.

Scotland is facing not only a housing shortage but an acute development viability crisis. The cost of delivering new homes is becoming increasingly challenging, with rising construction costs, regulatory requirements and existing remediation obligations already placing significant pressure on development economics. This could be particularly acute for new Build-to-Rent developments where the levy liability will arise at one point in time, rather than spread over a longer period of time as is often the case with many traditional private for-sale developments.

With some developers already contributing to their own cladding programmes and also through the UK Government’s Residential Property Developer Tax, we are concerned that the additional burden of the levy could push already marginal developments beyond the point of viability, reducing the supply of much-needed new homes at a time when Scotland can least afford it."