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In July 2025, draft regulations for the The Building Safety Levy (England) Regulations were laid out in Parliament to set out how the levy will operate, subject to Parliamentary approval.
The levy will come into operation on 1 October 2025.
We look at what the new legislation is, who it directly affects, and how it could impact the wider construction industry.
The Building Safety Levy, introduced under the Building Safety Act 2022, is a tax on new residential buildings. It will be collected by local authorities, who will act as local guardians of the building control process.
The aim is for the income generated from the levy to be used to fix building safety defects across England, with the primary goal of ensuring the safety of residents.
The success of the levy will be dependent on government, local authorities, and industry working in partnership.
The draft regulations were laid in Parliament on 10 July 2025. The levy will come into force on 1 October 2026, after being pushed back 12-months to give local authorities more time to prepare.
The Building Safety Levy is a charge that developers must pay on certain building applications and notices. The levy must be paid before completion of the building or before occupation on the building (whichever is earlier).
The levy will be charged on certain applications for work resulting in new dwellings and/or new bedspaces in purpose-built student accommodation (PBSA). It will also be charged on buildings whose purpose will change to residential use.
The government has set a revenue target of £3.4bn over ten years for the levy as it aims to ensure that taxpayers and leaseholders aren’t burdened with the cost of remediating unsafe buildings.
The government has set the levy rates for each local authority in the legislation. The amount payable will vary depending on the building’s size, use, and location.
The levy rates are weighted against the average house prices per area. So, areas with the highest house prices have been set the highest levy rates. Conversely, areas with low average house prices have the lowest levy rates.
The levy rates are set per square metre, with the charge calculated on the floorspace of the development (measured using Gross Internal Area (GIA), as set out in the RICS Code of Measuring Practice 6th Edition).
Communal areas will be subject to the levy charge. Several respondents lobbied for communal areas to be excluded, but the government’s viewpoint is that they are for the use or benefit of occupants and therefore contribute to the building’s value.
The amount payable will depend on:
In March 2025, Gowling WLG calculated some example rates based on minimum GIAs. Each example does not include calculation for associated communal areas.
Example A
Example B
The official text from the government explains this clearly:
“The Building Safety Levy will be calculated and collected at the application/initial notice stage and the commencement stage of the development process.
Developers will need to provide information to local authorities to calculate the levy liability, which will be based on the gross internal area (GIA) of the chargeable floorspace.
The levy will be calculated on a per square metre basis, with rates varying by local authority and whether the land is previously developed.
The local authority will calculate the levy amount within five weeks of the submission of the levy information and issue a notice of levy liability or confirmation that the levy is not applicable.
Failure to provide the required levy information will result in the rejection of the application for building control approval or initial notice.” https://www.gov.uk/
The levy is chargeable of certain new dwellings and purpose-built student accommodation (PBSA). The government doesn’t want to penalise – nor prevent the development of – important community facilities, so certain residential developments are exempt.
The following residential developments are exempt:
This includes:
As provided by a local authority, a housing association, a charity, or a voluntary organisation.
Applications for building control approval for works in relation to the provision of at least 1 dwelling or at least 1 PBSA bedspace – which solely include social housing or supported housing – must include levy information and must evidence exemptions at the commencement stage.
These applications and notices will be provided with a notice of no charge. Applicants must confirm levy exemption at the completion/ final certificate stage.
Other types of residential development which are excluded from the levy are detailed in Schedule 1 of the legislation. These excluded developments do not need to provided information as part of an application for building control approval. Also, the collecting authority does not need to issue a no charge notice.
These types of residential development include:
The construction industry is already facing huge challenges from the introduction of the Building Safety Act 2022, especially when it comes to gateway delays, which can lead to spiralling costs.
The potential extra financial impact could be far reaching and extremely damaging.
Increased development costs
The levy will add a new cost to development projects, potentially impacting profitability and viability, particularly for businesses with tighter margins.
Potential for reduced housing supply
The Home Builders Federation expressed concerns in March 2025 that the levy could hinder housing supply by increasing costs and discouraging development.
Potential for unbalanced development across the country
Developers may look to less expansive areas for their development opportunities as they look to retain margin and reduce costs. While this could be advantageous for areas that need regeneration, it could also be detrimental to affluent areas.
Where there is a higher housing demand, especially for those people working in cities who want to live within a commutable distance, there could be an even greater housing shortage.
Impact on land prices or housing prices
Some industry experts anticipate that land prices may need to decrease to offset the levy costs, potentially shifting the financial burden to landowners. Or, as an alternative, the prices of new homes may need to rise.
Extra administrative burden
Developers will need to comply with new administrative requirements, including providing accurate metrics on each development to calculate the levy. This will undoubtedly put extra administrative strain on teams who are already stretched.
The levy could affect the supply of affordable housing if non-profit registered providers are also subject to it.
Potential disruption to financing
Developers may need to seek additional funding to cover the levy costs. This could mean that lenders might adjust their assessments of projects and their viability.
Complexity of implementation:
The government’s approach to calculating the levy rates, including the use of a blanket rate for each local authority, has faced criticism for potentially not reflecting local variations in house prices.
The biggest potential impact of this extra burden on the construction sector, is the potential for a recession. It is widely believed that when the house building sector slows down, that becomes a key catalyst for recession, which would affect everyone.
Developers will need to await publication of the regulations for details of the trigger point for when developments currently in the pipeline will be subject to the Levy. This is currently expected to be based on the timing of submission of the building control application/ initial notice.
For more in-depth information about the building Safety Levy, please consult the Ministry of Housing, Communities and Local Government.
Forming a deep understanding of the Building Safety Act 2022 will be beneficial for all construction professionals.
At 3B Training, we offer three courses – which you can book online – which cover key aspects of the Building Safety Act.
Click here to book your seat on a Building Safety Act course today.
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