The Scottish building safety levy: parliamentary approval amid industry concern

This insight has been updated following Stage 2 amendments to the Building Safety Levy (Scotland) Bill (as at 13 February 2026).

On 8 January, the Scottish Parliament held a robust debate and narrowly agreed the general principles of the Building Safety Levy Scotland Bill, with 65 MSPs voting in favour and 54 against.

There has already been much discussion about the form and impact of the Scottish building safety levy (“SBSL”), since the bill was introduced in June 2025. The SBSL aims to raise £30 million per year to fund improvements to building safety in Scotland, by introducing a new tax on the construction of residential property development in Scotland. This will echo many of the principles of the proposed English building safety levy, which is due to come into effect from 1 October 2026.

While the need for building safety was undisputed, significant concerns were raised at the parliamentary debate about the SBSL’s impact on the housing sector, particularly small and medium-sized developers and rural projects (and the introduction of a new tax on housebuilders at a time when a housing emergency has been declared). Ahead of the debate, the Finance and Public Administration Committee notably did not support the general principles of the bill at stage one (see here), highlighting a “lack of detail on administrative processes and rates” and stressing the need for a “sensitivity analysis” to understand fully how the SBSL might affect development viability, as well as clearer reporting and a sunset provision to prevent a permanent tax burden. There is also the question raised by several MSPs of what effect the SBSL will have on large single-site developments like build to rent, which could face a significant liability (and cash flow hit) without any corresponding capital receipt on sale.

Frustration with the Scottish Government's slow progress was also evident in the debate, with criticisms about the limited number of single building assessments conducted post-Grenfell. There were calls for fairness and a comprehensive “polluter pays” principle that holds all responsible parties accountable, not just developers. Supporters of the bill acknowledged the importance of ensuring costs don’t fall solely on homeowners, however, the debate exposed clear tensions between the urgency of safety requirements and the practical challenges facing housebuilders. Numerous participants called for further detail and amendments to protect the sector before the SBSL is intended to be brought into force, which has already been delayed to 1 April 2028.

We will continue to support the industry bodies engaging with the Scottish Government to deliver a workable and fair levy that raises funds for essential building safety measures in a way that is proportionate, and without impeding the delivery of more homes.

Update: significant amendments at stage 2

Following January’s Stage 1 debate, the Building Safety Levy (Scotland) Bill moved to Stage 2 before the Finance and Public Administration Committee on 10 February. This critical stage saw a raft of amendments, aimed at balancing the urgent need for cladding remediation funds with the long-term commercial viability for Scotland’s construction and housebuilding industry.  

The session resulted in numerous amendments to the Bill, ahead of going to Stage 3 before MSPs for final changes and voting. These amendments provide some needed clarity for the sector, including:

Sunset Clause

A new provision now stipulates that the Act would expire after 15 years. This is designed to align with the anticipated lifespan of the Scottish Government’s Cladding Remediation Programme. Whilst there would be a power to extend this period via regulations, where such an extension is sought Scottish Ministers would have to lay a statement before the Scottish Parliament setting out why an extension is necessary. This “sunset clause” is a measure lobbied for by various stakeholders, aiming to ensure the levy does not become a permanent tax on the industry. It is also significant because a similar sunset clause was sought for the English building safety levy but was not ultimately included. Under another amended section, Scottish Ministers would also be under a duty to provide more details in reporting on the operation of the Act every three years. This would include an assessment of how the proceeds of the SBSL have been used and building safety work undertaken by the Scottish Ministers using SBSL funds.

Brownfield Land 

It was acknowledged that redevelopment of brownfield land can come with higher costs, such as decontaminating and preparing sites. As such, a new section means that lower SBSL rates for brownfield land would apply, with a relief of no less than 50%, aiming to ensure redevelopment of potentially complex and previously developed land is economically viable. This would match the position for brownfield land under the English levy. 

Levy-Free Allowance

The Levy-Free Allowance i.e. the threshold set before the SBSL applies to a taxpayer, has been much discussed. Stakeholders were reportedly concerned that a figure of 19 new residential units had emerged without consultation. In any case amendments have now clarified in a new section that the Levy-Free allowance would be 29 building control events within a financial year (with a “building control event” occurring on the completion date of the construction of, or conversion works creating a new residential unit). We also welcome the powers introduced into the Bill to allow the Scottish Parliament to pass regulations to allow for any unused Levy-Free Allowance to be carried forwards for up to two years. If implemented this would be of assistance to some SMEs and it is hoped that such power will be used. 

Communal Areas

For Purpose-Built Student Accommodation (PBSA) and Built-to-Rent (BTR) schemes, there was discussion on what would be considered as “taxable floorspace”. Amendments now refer to the SBSL applying “to the extent that” a building is intended to be used / is used for student accommodation or BTR. It is understood the intention would be to allow communal areas for example gyms and non-residential floorspace, to be excluded from the SBSL calculation, therefore preventing taxation of non-living spaces that do not contribute to the dwelling count. However, the amendments are not express and there may be more to come on this at Stage 3 to bring greater clarity.

Hotels 

In answer to proposed amendments to incorporate hotel developments into the scope of the SBSL, to reach those with the ‘broadest shoulders’, it was clarified that buildings used for commercial hospitality would not be caught. Instead, the proposed SBSL remains strictly a tax on residential property development. Whilst it is critical that building safety issues are addressed and that the pace is quickened on resolving these, this is an example of the disconnect between property types which will be used to fund the SBSL and the range of buildings which may benefit from the resulting expenditure. It is therefore important that the Scottish Parliament continues to assess the impact of the SBSL and other initiatives on the housebuilding sector. 

Overall, we welcome that the Scottish Parliament is continuing to listen to and to take on board some of the representations that have been made. However, key points of substance in the SBSL are still to be set out in regulations which will flow from the Bill and indicative SBSL rates are not expected until June 2026. Amendments have expanded the requirement for consultation on those regulations, which will be widely welcomed. It is also hoped that the regulations are published as early as possible, to allow the housebuilding sector to accommodate the detail of the SBSL and to minimise the turbulence that could arise from its introduction.

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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