The Building Safety Levy (Scotland) Bill passes: what this means for Scottish construction and housebuilding

The Building Safety Levy (Scotland) Bill has been passed by the Scottish Parliament and will become an Act following Royal Assent.

While many of the industry’s concerns remain unresolved, the bill’s approval brings a degree of certainty about when the levy will apply, how it will operate and how the proceeds will be used.

There has been significant discussion about the Scottish building safety levy (“SBSL”) since the bill was introduced in June 2025, to be a new tax on the construction of residential property development in Scotland to fund building safety improvements. This follows suit from the English building safety levy, which is due to come into effect from 1 October 2026, although with key differences. In this article, we build on our previous analysis of the bill at parliamentary Stages 1 and 2 (available here) and consider what the final form means for developers and housebuilders operating in Scotland.

The final parliamentary Stage 3 debated substantial amendments and led to the final form and passing of the bill. Here are the key points to note:

When will the SBSL start and end?

The start date has been a closely watched issue. The Scottish Government had already announced a 12-month delay from 1 April 2027 to 1 April 2028, for the SBSL to come into effect. However, amendments to guarantee that any construction or conversion works begun before 1 April 2028 would not be subject to the SBSL, were rejected. Therefore, the SBSL will bite for projects involving new residential units that complete from 1 April 2028 onwards (i.e. where there are taxable “building control events”, being the acceptance of a completion certificate or permission for temporary occupation). There will be no transition period.

As reported previously, there is also a shelf life on the SBSL by way of a “sunset clause”, providing that once the bill becomes an Act and comes into force it will expire after 15 years. This is subject to a power to extend the Act via regulations, provided the Scottish Ministers lay a statement before the Scottish Parliament setting out why an extension is necessary. This is designed to align with the anticipated lifespan of the Scottish Government’s cladding remediation programme and to ensure that the SBSL does not become a permanent tax on the industry, whilst the option of an extension is in recognition of the potential for unforeseen costs to the programme. The Minister for Public Finance also stated that he was prepared to consider “what payment flexibilities can be put in place during the first few years” of the SBSL in relation to developers of built-to-rent and purpose-built student accommodation, noting that the Scottish Government will work with industry and Revenue Scotland to consider the scope of any payment flexibilities and appropriate safeguards.

Meantime for those in the sector, this means a relatively short timeframe to factor the SBSL into land pricing, development appraisals and current projects before it comes into effect on 1 April 2028.

What is required before rates are set?

Various amendments sought to require the Scottish Government to commission independent “sensitivity analyses” before publishing SBSL rates, along with a mandatory 22 month notice period between that publication and the rates coming into force. These amendments were rejected. The Scottish Government’s position was that it already intended to publish updated impact assessments ahead of rate setting and that imposing such statutory requirements would be unnecessarily complex and out of step with other devolved taxes, including the English building safety levy.

Indicative rates are expected to be published in June 2026. However from an industry perspective the lack of a legally binding notice period, along with the lack of a transition period, adds to uncertainty around the financial impact of the SBSL, particularly for long‑term and phased developments. 

What reliefs and exemptions changed? 

This was a mixed picture. Some measures were already enshrined in the bill from Stage 2, with a minimum 50% relief for new residential units on brownfield land and a levy-free allowance of 29 units within a financial year (which the Scottish Government says will remove around 85 per cent of developers from the scope of the SBSL entirely). A further amendment was also passed which means future regulations may create a relief or partial relief from the SBSL on homes sold to first‑time buyers. This reflects wider policy objectives around supporting access to home ownership and recognises the role that SMEs may play in the first‑time buyer market, which accounts for 22 per cent of new-build sales. However, the definition of affordable housing remains unchanged and quite narrow, restricted primarily to social and affordable housing delivered via the Scottish Government’s grand-funded programme. Other proposed exemptions were also unsuccessful, including exemptions for historic listed buildings.

However, the regulations to be made after the bill becomes an Act remain key for setting out the full scope and operation of reliefs and exemptions. Meantime more information is to follow (with an analysis of how the SBSL will interact with parts of the sector such as rural housebuilding and small developers, expected before the indicative rates are published) and further consultation will be required. For developers, this reinforces the importance of understanding when SBSL liability will crystallise and how this is addressed contractually and commercially.

How will SBSL funds be used?

An important amendment confirmed how the SBSL proceeds can be spent. The Scottish Government has consistently stated its intention to use the proceeds to fund its cladding remediation programme – currently forecast to be between £1.7 and £3.1 billion over the expected 15-year lifetime of the programme, which the SBSL will contribute an estimated £450 million towards. However some were concerned that the bill’s drafting would give discretion to broaden the use of funds over time, risking undermining the purpose of the legislation and damaging confidence in the housing sector. It is now clarified in the bill that the SBSL proceeds must be used by Scottish Ministers in reimbursing or otherwise paying the costs of remediation, mitigation or prevention works (and associated or ancillary works) in buildings with external wall cladding systems, including work that is undertaken as part of single building assessments. As reported previously, the Scottish Ministers are also obliged as part of reporting every three years on the operation of the Act, to include an assessment of how the SBSL proceeds have been used and building safety work undertaken.

While this does not reduce the financial burden of the SBSL itself, it provides greater certainty about where proceeds will go and prevents the SBSL being broadened to fund general building safety and beyond.

What does this mean for the construction and housebuilding industry?

There has been mixed success for the industry bodies who have lobbied hard at the committee stages of the bill.  However with the bill now passed, the focus for stakeholders shifts to implementation and risk management. Many practical details – including the SBSL rates, payment mechanisms and the scope and operation of reliefs and exemptions – are still to be set out in future regulations and further consultation will be closely scrutinised by the industry. Meantime concerns remain about the cumulative impact of the SBSL on smaller developers, SMEs and marginal sites, with some estimates that the SBSL will add £3,500 to the cost of building a new home. In addition, build-to-rent and PBSA developers now know that they will be subject to the SBSL, but will be awaiting clarification of what “payment flexibilities” will help cushion the blow for their unique circumstances.

The SBSL is now a reality that must be factored into projects completing on or after April 2028. For developers and contractors, early engagement, viability modelling and careful contracting will be essential.

If you would like to discuss anything raised in this article, please get in touch with our Building Safety Group or your usual Burness Paull contact. 

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