Update on the Scottish Building Safety Levy: What Developers need to know now

The Scottish Building Safety Levy is now a certainty. Approved by the Scottish Parliament on 17 March 2026, it will apply from March 2028 and will affect the viability, structuring and timing of residential development across Scotland.

Like the levy in England (due to come into force on 1 October 2026), the Scottish levy is intended to fund the remediation of unsafe buildings where recovery cannot be made from the responsible developer. In Scotland, the levy is expected to raise up to £450 million over a 15‑year period.

Developers operating in Scotland should now be factoring the levy into project appraisals, contracts and cash‑flow planning, particularly where schemes are expected to complete around the commencement date.

This Legal Update summarises the key features developers need to understand now, including when the levy is triggered, who is liable, how it is calculated and the steps required to stay compliant and manage cost exposure. 

When is the levy payable and what is the levy free allowance?

Although originally intended  to apply from 2027, the Scottish levy has been deferred by one year (as was the case in England) and will now apply from March 2028.  This will provide a limited window for property developers to factor the cost of the levy into their developments and, if possible, to  fast track existing proposals in order to avoid the application of the levy.

As we discussed in our Legal Update, The Building Safety Levy in Scotland and England: key developments and considerations (July 2025), the levy is a tax charged on the completion date for the construction of a new residential unit or the conversion of an existing building to create a new residential unit. The building completion date is acceptance of the completion certificate or, if earlier, the grant of temporary occupation permission.

In Scotland, developers will not have to pay the levy on their first 29 residential units constructed each financial year (beginning 1 April).  This portfolio-based allowance is intended to protect  smaller developers from the levy charge and takes a different approach to that adopted in England. By contrast, England’s levy applies to “major residential development” defined as the creation of 10 or more dwellings or at least 30 bedspaces in student accommodation. The Scottish approach may therefore be particularly relevant for developers delivering multiple smaller schemes across Scotland.

As in England, a mandatory 50% reduction of the otherwise applicable levy charge applies where the new residential unit is constructed on brownfield land, making site classification an important early viability consideration. 

What counts as a “new residential unit”?

The definition of “new residential unit” is broad and captures most mainstream residential development. A new residential unit is the whole or part of a constructed or converted building intended to be used as a dwelling or other accommodation, including student accommodation and buy-to-let residential units built for tenants. Key exclusions currently include: hotels and similar temporary accommodation, certain residential institutions (such as care homes, hospitals, prisons, military accommodation, and school boarding), specified religious and charitable accommodation, and asylum support accommodation.

Which new residential units are exempt?

Exempt units include pre-existing residences that retain the same number of dwellings after works, social housing (Scottish secure and short Scottish secure tenancies), affordable housing funded under specified Housing (Scotland) Acts, and units situated on an island, as defined in the Islands (Scotland) Act 2018 .

Who is liable to pay?

Liability falls on the owner of the new residential unit at the relevant building control event (being the date of submission of the completion certificate or, if earlier, the date of application for temporary occupation).  Where there are multiple owners the liability is joint and several.

How is the levy calculated?

Although rates are not yet known, the framework for calculating liability is now fixed. The total liability for the levy in an accounting period is determined by counting all ‘completion dates’ (taxable building control events) for units owned at the relevant date, deducting any reliefs, applying the levy-free allowance, and charging the remaining events at the applicable rate multiplied by the unit’s floorspace. Revenue Scotland is responsible for the collection and management of the levy.

Scottish Ministers will set the rates by regulations with reference to the floorspace in square metres of the new residential unit, and may set different rates by geography, land type, or other factors, and prescribe measurement methodology and verification. Indicative rates are expected to be provided by June 2026. By way of example, the levy rates in England vary considerably depending on the geographic location of the development, with levy rates published for each local authority area e.g. from the highest rate of £100.35 per sq. m in Kensington and Chelsea, to the lowest rate of £12.70 per sq. m in County Durham (for non-Previously Developed Land).

The Scottish Bill establishes a framework for regular review of the levy, with Ministers required to report on its operation no later than every three years from the Bill coming into force. This allows the Scottish government to review the revenue target in light of housing market conditions, wider economic factors, and the evolving scale of cladding remediation expenditure. 

Scottish building safety levy register: when must developers register?

The owner of a new residential unit must register when a registrable event occurs, being the earlier of completion certificate submission or application for temporary occupation permission, provided any subsequent building control event would be taxable or would only not be taxable due to a relief.

Notification to Revenue Scotland is required at the time the person becomes liable to be registered, and in addition to voluntary registration, Revenue Scotland may register a person from the time of the registrable event. Groups of companies must register together in the name of the representative member.

Revenue Scotland will maintain this public register and may publish specified information about registered persons, including names, trading names, registration numbers, business addresses, group membership, and tax representatives for non-resident taxpayers.

Security for payment

If it appears necessary to do so for the protection of the levy revenue, Revenue Scotland may direct individual persons or tax representatives to provide security, set amounts and conditions, and require payment by specified dates. This security covers levy, penalties and interest that may become due. 

Penalties and enforcement

Penalties under Scottish taxation legislation are extended to the levy for failures to file returns, failures to pay, and inaccuracies in returns. Specific levy-only penalties are also prescribed, including £10,000 for failing to request approval of a tax representative (for non-resident taxpayers).

A reasonable excuse defence is available, assessments must be notified and paid within 30 days, and appeal rights extend to key levy decisions including group status, tax representative requirements, and security .

Practical steps for developers

Concerns have been raised about the levy, with the Scottish Parliament’s Finance and Public Administration Committee warning late last year that it carries “significant risk” to the housing market, and on the delivery of houses in areas where the viability of building sites is already challenging.

Despite this, the Bill is going ahead with regulations further outlining the levy expected in the coming months. Many provisions in the Bill are also subject to potential amendment in the future by the making of further regulations, including the levy free allowance, other relief and exemptions, and the period for which the levy will apply. The new levy regime currently expires 15 years after the Bill comes into force, unless extended by Parliament.

Next steps for developers in Scotland include:

• Model potential levy exposure early, taking account of floorspace, geography and brownfield relief.
• Stress‑test scheme viability, funding assumptions and pricing models.
• Map projects to “new residential unit” definitions and test for exemptions.
• Track when completion certificates are submitted or temporary occupation permissions are applied for.
• Register promptly at the registrable event and set up accounting processes for returns.
• Model levy exposure using floorspace and geographies, and monitor forthcoming regulations on rates and measurement.
• Maximise reliefs, particularly the mandatory brownfield 50% relief, and apply the levy-free allowance across your portfolio and group.
• For non-resident structures, appoint approved UK tax representatives and budget for any required security.
• Update contracts, appraisals, and cash flow forecasts to include levy timing and penalties risk.