18th March 2026
Significant funding to fix building safety issues in Scotland will be unlocked thanks to new legislation.
The Building Safety Levy Bill, which has been approved by the Scottish Parliament, will see a tax charged on the construction of certain new residential properties from April 2028.
This measure is in line with equivalent legislation in England.
The levy aims to raise £450 million over 15 years to help fund work to fix residential buildings with unsafe cladding which have no linked developer.
The Scottish Government's Building Safety Levy (Scotland) Bill represents one of the most significant changes to housing taxation in recent years. Designed to help fund the remediation of unsafe cladding and other building‑safety defects, the levy will apply to the construction of new residential properties from April 2028.
Although the levy is charged to developers rather than homebuyers, its introduction raises important questions about housing affordability, regional impacts, and the future of development—particularly in rural areas such as Caithness, where the housing market is more fragile than in Scotland's major cities.
Who Will Pay the Levy?
The levy is explicitly targeted at developers of new residential units. It is not a tax on homeowners, buyers, or tenants. Instead, it applies when a developer completes the construction or conversion of a building that results in new residential units. The charge is triggered at the point when a completion certificate is accepted by building control.
The Scottish Government's intention is clear: those who profit from new housing supply should contribute to the cost of fixing legacy safety issues, particularly unsafe cladding on existing buildings.
Who Will Be Exempt?
Although the final exemption list will be set in secondary legislation, the Bill and committee discussions indicate several categories that will almost certainly be exempt:
Likely Exemptions
Social housing developments
Affordable housing delivered by councils or housing associations
Small‑scale developments (threshold to be defined)
Conversions that do not create new residential units
Hospitals, care homes, and student accommodation
Non‑residential buildings
These exemptions reflect the policy goal of protecting public‑interest housing and avoiding additional burdens on essential services.
For Caithness, where much new development is small‑scale and often delivered by local builders, the exemption for small sites may be particularly important—though the exact definition of "small" remains to be set.
How the Levy Will Be Calculated
The Bill does not set a specific rate. Instead, it creates a legal framework, with the Scottish Government to define the rate later through regulations. However, several features of the calculation are already clear:
Key Elements of the Calculation
The levy will be charged per residential unit, not per project.
The rate may vary by:
Location (e.g., Highlands vs. Central Belt)
Type of development
Scale of the project
Payment is due when the completion certificate is accepted.
The levy is expected to raise £360-£450 million over 15 years.
Because the Highlands has a more fragile housing market than urban Scotland, there is ongoing debate about whether rural areas should have lower rates or additional exemptions to avoid discouraging development.
How the Scottish Levy Compares to the English Levy
Scotland's levy is inspired by, but not identical to, the English Building Safety Levy introduced under the Building Safety Act 2022.
Key Differences
Scope: Scotland's levy is broader, applying to most new private residential units. England’s levy applies mainly to higher‑risk buildings.
Timing: Scotland charges at completion, while England charges at the building control approval stage.
Rates: England has already published detailed local‑authority‑specific rates; Scotland has not.
Purpose: Both fund cladding remediation, but Scotland’s programme is proportionally larger relative to its housing stock.
In practice, Scotland’s approach places a more uniform burden on developers, whereas England’s is more targeted.
Will the Levy Increase the Cost of a New House?
The Scottish Government argues that the levy is aimed at developers, not buyers, and that the market will adjust. However, industry bodies and parliamentary committees have warned that:
Developers may pass the cost on to buyers.
Some projects may become financially unviable, reducing supply.
Rural areas like Caithness, where margins are already tight, may be more sensitive to additional costs.
Whether prices rise will depend heavily on the final rate and the strength of local housing demand.
Per‑Unit Cost Estimates Under Different Rate Scenarios
Because the Scottish Government has not yet set the levy rate, we can only model illustrative scenarios. These estimates assume the levy is charged per unit, similar to the English model.
Scenario 1: Low Rate (£1,000 per unit)
Typical 3‑bed new‑build home in Caithness:
£1,000 added to developer cost
Likely impact:
Developers may absorb some or all of this in rural areas to maintain sales.
Minimal effect on house prices.
Scenario 2: Medium Rate (£3,000 per unit)
Developer cost per home: £3,000
Likely impact:
Small developers may struggle to absorb the cost.
Prices could rise modestly (e.g., £1,000-£3,000 depending on market conditions).
Some marginal projects may be delayed or cancelled.
Scenario 3: High Rate (£7,000 per unit)
Developer cost per home: £7,000
Likely impact:
Significant pressure on rural development viability.
Higher risk of cost pass‑through to buyers.
Potential reduction in new‑build supply in Caithness and other rural areas.
Scenario 4: Very High Rate (£10,000+ per unit)
(Comparable to some English local‑authority rates for high‑risk buildings)
Developer cost per home: £10,000-£12,000
Likely impact:
Many rural developments become unviable.
Strong upward pressure on prices.
Risk of widening the rural housing shortage.
What This Means for Caithness
Caithness has a unique housing profile:
Lower average house prices than the Scottish average
Smaller developers with tighter margins
A need for new housing to support local economic development
A fragile market where even small cost increases can affect viability
For these reasons, the final levy rate—and any rural exemptions—will be particularly important for the region. A high levy could slow development, while a carefully calibrated or regionally adjusted rate could minimise disruption.
The Building Safety Levy is a major policy tool designed to ensure that developers contribute to the cost of fixing unsafe buildings across Scotland. While the levy is not charged to homebuyers directly, its impact on development costs means it could influence house prices—especially in rural areas like Caithness.
The final effect will depend on the rate the Scottish Government sets, the exemptions it confirms, and how developers respond to the new cost environment.
If the levy is set at a modest level, its impact may be limited. If it is set high, it could reshape the economics of rural housing delivery for years to come.
Building Safety Scotland Levy Bill