The Scottish Building Safety Levy: an update on implementation

The Scottish Building Safety Levy was approved by the Scottish Parliament in March 2026 and will apply to the construction of certain new residential developments from 1 April 2028. The levy is intended to fund the remediation of unsafe buildings where recovery cannot be made directly from a responsible developer. It will have real consequences for how residential projects in Scotland are appraised, structured and programmed.

We published an insightful commentary in March 2026 on the potential implications of this levy for developers in Scotland: Update on the Scottish Building Safety Levy: What Developers need to know now.  In this Legal Update we look at further developments, in particular at the implications of the October 2026 Scottish Government publication: Building Safety Levy: advice from the Regulatory Review Group, and issues raised by the Regulatory Review Group, as well as the Government’s response. 

Building Safety Levy Act and technical consultation

The Building Safety Levy (Scotland) Act 2026 received Royal Assent on 13 May 2026. Some sections are in force from Royal Assent, and under The Building Safety Levy (Scotland) Act 2026 (Commencement No. 1) Regulations 2026 (made on 3 November 2026) many operative provisions will come into force on 1 December 2026. This brings into force the powers to make regulations under the Act. Regulations made under those powers will provide further detail on the operation and administration of the levy. The levy itself will not be chargeable until 1 April 2028. Unlike the English Building Safety Levy, which came into operation last month and is applicable at building approval stage, the levy in Scotland is charged on the completion date of the works. Subject to any transitional provisions, the levy may be applicable to some projects currently planned where completion of works will take place when the levy is in force.

In July 2026, the Government consulted on technical aspects of the levy, including the proposed floorspace methodology for assessing the levy payable, options for further exemptions or relief, and flexibility of payment for certain types of development.  Under the current proposals, levy payers would be entitled to an annual tax-free allowance of 29 units, which the Government anticipates will mean around 85% of developers, in particular smaller and rural housebuilders, will not be subject to the levy. The consultation closed on 9 October 2026.

Advice from the Regulatory Review Group 

Established by the Scottish Government, the remit of the independent Regulatory Review Group ("RRG") is to identify the practical challenges of implementing regulation, and how these may be mitigated; it does not comment on the merits of the underlying policy or on legislative priorities. This Legal Update reviews the RRG's response to the Building Safety Levy, as set out in a letter to the Deputy First Minister and Cabinet Secretary for Finance and Local Government, including the extent to which consumers will bear the costs imposed by the levy, the sufficiency of the levy itself, and whether there is a need for a programme of monitoring.

Will consumers bear the cost of the levy?

Scottish Government policy officials met with the RRG and advised that housebuilders are unlikely to absorb the full cost of the levy. Rather, the impact of the levy may ultimately be reflected in the price developers are able to pay for land, given the likely ceiling that consumers are willing to pay for new-build homes.

The RRG welcomed government engagement with stakeholders on this point, and noted that the risks to consumers and the housing market have been considered. However, risk remains and it is still uncertain whether consumers will be affected, and if so, to what extent. The RRG highlighted that, if housebuilders pass on the cost of the levy, this could in turn affect housing supply.

The RRG also pointed to the risk of inconsistency. While some housebuilders may absorb the additional cost imposed by the levy, others could pass it on to buyers. For developers, this underlines the significance of pricing strategy, and how the levy is priced will necessarily represent a key commercial decision.

Will the levy be sufficient?

The levy is expected to raise up to £450 million over a 15-year period. The Government have nevertheless advised the RRG that the funds ultimately raised by the levy are only expected to cover about 25% of the total likely costs of remediation. The RRG raised concerns as to how the remaining 75% of the cost of remediation works will be met. Accordingly, the RRG has recommended that the Scottish Government investigate and confirm how any funding shortfall will be addressed.

For developers, a potential funding gap is worth watching closely in terms of future increases in the levy payable. The RRG notes both that the levy is expected to meet only around 25% of remediation costs and that rates and exemptions will be capable of review. Indeed, the Building Safety Levy (Scotland) Act 2026 requires Ministers to report on the operation of the Act at intervals of no more than three years. This regular review will assess how the proceeds of the levy have been used and which remediation works have been funded, allowing a review of the levy payable in light of the evolving scale of cladding remediation and other economic factors. While the RRG does not suggest that rates will necessarily increase, the scale of the projected shortfall means that the future scope and level of the levy will remain an important development viability risk.

Is a monitoring programme needed?

The RRG has called for a comprehensive monitoring programme to (i) identify issues and unintended consequences following the implementation of the levy; and (ii) ensure that remediation is carried out as intended.

The RRG has welcomed the Government’s commitment to build the three-year review programme into the policy. Given the potential impact on housebuilders and consumers, the RRG has stressed that clarity on remediation costs and on any unintended consequences will be essential.

Government response to the RRG

The Deputy First Minister replied to the RRG on 14 October 2026, welcoming the recommendations made and the continued engagement with Government.

The Government confirmed that the effects of the levy on buyers and housing supply have been taken into account throughout the policy's development. It expects the cost of the levy to be reflected primarily in land values over the medium to long term. The Government also pointed to the targeted exemptions and allowances available to smaller, rural and island housebuilders as examples of relief, and committed to continue working with the sector ahead of the levy's introduction in April 2028 to monitor potential impacts.

With respect to remediation funding, the Government restated its position that homeowners should not pay for essential cladding remediation. It described the levy as one part of a broader package of measures, supported by £375 million of funding committed over the current Spending Review period. However, it did not address how the projected shortfall will be met.

The Government also accepted the RRG's recommendation on monitoring, noting that the statutory review and reporting requirements will allow it to assess the levy's effectiveness and identify any unintended consequences. The response concluded with the Government offering to provide a further update to the RRG ahead of the full implementation of the levy.

What’s next for developers?

The RRG has invited the Scottish Government to further engage with the RRG in the future and explain how it intends to respond to the recommendations made as the regulations necessary to implement the 2026 Act progress through the legislative process. For developers, the RRG’s advice reinforces that the levy should not be treated simply as a future tax compliance issue. Developers should continue to factor it into land acquisition and development appraisals for schemes extending beyond 1 April 2028 and monitor the regulations closely as the rates and detailed mechanics emerge. The projected funding gap, together with the planned three-year review, also means that assumptions made at the outset for longer-term developments may need to be revisited.