Introduction
The Building Safety Levy (Scotland) Bill was introduced on 5 June 2025. The Bill introduces a new tax, called the Scottish Building Safety Levy (SBSL), to be charged on the construction or conversion of residential property developments, with some exceptions. This follows an amendment to the Scotland Act 1998 to include powers for a devolved tax to be charged in relation to certain steps in the building control process.
Money raised through this levy will be used to fund building safety expenditure. An equivalent tax is also being developed in England.
Overview of the Bill
The Bill defines:
- which types of developments will be liable to pay the SBSL and those which are exempt,
- when in the construction process the tax will be due,
- how the SBSL will be calculated,
- penalties for non-compliance and how appeals will be handled,
- reporting requirements on the operation of SBSL.
The Financial Memorandum suggests that the public costs of the cladding remediation programme could be in the range of £1.7 billion to £3.1 billion over a potential 15 year programme of works. This is based on analytical work to estimate the number of residential buildings above 11 metres in height in Scotland. To estimate costs the Scottish Government uses unit cost information from the rest of the UK, considering building height, the percentage of buildings likely to need remedial work, the degree of remedial works required and the subset to be developer led. If there are material differences in these factors, for example if a higher or lower percentage of buildings in Scotland require remediation than in England, then the total cost may be different to that currently anticipated.
Revenues from the building safety levy are expected to make a contribution to these public costs. The overall costs of cladding remediation will be supported by two additional sources of funding:
- Developer led remediation. The Scottish Government is working with large developers to agree a contract for further assessment and remediation in 2025. The estimated overall programme costs above adjust for an assumed share of developer led buildings.
- Residential Property Developer Tax is a UK wide corporation tax supplement which has operated since 1 April 2022. The UK Government intends for this to raise £3 billion over a 10 year period. The Scottish Government expects Scotland’s share of these receipts through the Barnett formula will be £194 million over 10 years and has stated that these Barnett consequentials will be spent on cladding remediation.
Figure 1: Anticipated costs of cladding remediation in Scotland and sources of funding
Stage 1 summary
On Thursday 11 December 2025, the Finance and Public Administration Committee published its Stage 1 report on the Bill. The Committee made no recommendation on the general principles of the Bill, noting concerns around the impact on the house building market, and that the policy design is focused on raising an arbitrary amount of revenue. The Stage 1 Report made several other recommendations, including:
- The Committee is persuaded by the evidence received that the SBSL will have a macroeconomic effect on the Scottish housing market.
- Therefore, the Committee recommended that the Scottish Government undertakes a sensitivity analysis to assess in more detail the impact of the levy on the housing market and on rural sites and on SME developers.
- That there is a strong case for exempting ‘remote rural areas’ from the scope of the levy.
- The Committee asks that the Scottish Government considers calculating the levy based on market value of the property rather than total surface as a way of taking into account the features of local housing markets.
- The Committee welcomes the Scottish Government’s commitment to provide relief to brownfield site developments.
- The Committee recommends that the reporting requirements in section 45 of the Bill are strengthened so that the Scottish Government is required to report at mandatory intervals on the operation of the Bill. The report should include an assessment of how the levy is impacting the Scottish housing market in practice.
- That the Scottish Government considers a targeted broadening of the exemption for historic building conversions which will help to protect historic buildings that may otherwise remain abandoned.
- The Committee recommends that affordable homes funded by local authorities should not be subject to the levy.
- The Committee accepts that there is an argument for large hotel developments to be included in the scope of the SBSL.
- The Committee remains to be convinced of the Minister’s argument that restricting the proceeds of the levy to cladding remediation only will result in additional cost and complexity and therefore recommends that the Scottish Government gives further consideration to adding such a restriction to the Bill and that it reports back to the Committee on its findings at the earliest opportunity.
- The Committee recommends that the Bill is amended to include a sunset clause to provide an opportunity to review after 15 years how the levy is operating and for the Scottish Parliament to then decide whether the law should remain in place.
- The Committee is concerned that the initial set-up costs for the administration of the levy exceed Revenue Scotland’s target of 1% of revenues generated.
- The Committee suggested that the target proceeds of £30 million was an arbitrary figure and optimistic given the uncertainties around the potential impacts and behaviours.
The Scottish Government responded to the Stage 1 report on 6 January 2026, and committed to:
- Publish an updated impact assessment alongside the publication of rates for the levy.
- Extend the exemption to the most remote areas of the mainland (Knoydart, Scoraig and Cape Wrath).
- Publish its definition of brownfield sites alongside indicative levy rates in June 2026.
- Amend the Bill at Stage 2 to require reports to be laid at least every three years after commencement.
- Consider broadening the exemption for historic buildings to include conversions.
- Publish indicative rates in June 2026, which the Scottish Government notes is nearly two years before the introduction of the Scottish Building Safety Levy.
Stage 2 in the Finance and Public Administration Committee
Stage 2 took place on Tuesday 10 February 2026, when the Finance and Public Administration Committee considered 66 amendments. The Marshalled List (a list of all the amendments that were lodged) and Groupings (how the amendments in the Marshalled List were grouped together for debate) are available on the Bill page of the Scottish Parliament website. The Official Report of the Stage 2 meeting is also available.
At Stage 2, 16 amendments to the bill were agreed. These were:
- Amendment 3 specifies that Scottish Ministers must consult with persons who “represent the interests of the residential property development sector” prior to changing the categories of buildings that are included in or exempt from the definition of a new residential unit.
- Amendment 4 clarifies the definition of the taxpayer of the levy, to remove uncertainty which might occur during the period when the property had been sold but the title not yet registered.
- Amendment 5 makes a similar modification to amendment 3, requiring consultation with representatives of the residential property development sector before regulations are made under Section 10 of the Bill.
- Amendment 31 requires that the Scottish Government introduce a relief of at least 50% for developments on brownfield sites.
- Amendments 54 and 55 increase the minimum levy free allowance from 19 units to 29 units.
- Amendment 56 provides for carrying forward of an unused levy-free allowance.
- Amendment 7 requires that Revenue Scotland cancel a person’s registration where that person has notified Revenue Scotland and Revenue Scotland is satisfied that the person has ceased their activity and will not carry out any activity that could give rise to a levy liability.
- Amendment 8 provides a legal gateway to “support targeted, secure and proportionate information sharing”
- Amendments 9 and 12 requires that the Scottish Government report on the legislation every three years
- Amendment 10 requiring reporting under the legislation, once enacted, to set out the work that has been fully or partly funded from the proceeds of the levy. Amendment 11 allows these reports to refer to the annual progress report that is already required under the Housing (Cladding Remediation) (Scotland) Act 2024.
- Amendment 13 will ensure that regulations that are made under that Section 48 are subject to the affirmative procedure
- Amendment 15 introduces a sunset clause that will require that the legislation will cease after a 15-year period. Ministers will be able to, through regulations, extend the period of operation. Amendment 14 requires that such regulations are subject to the affirmative procedure.
Looking ahead to Stage 3
During Stage 2 proceedings, the Minister for Public Finance committed to work with members in two areas ahead of Stage 3. These are:
- Ensuring that the levy does not have a disproportionate impact on first time buyers.
- Ensuring that funding will only be used to fund cladding remediation, in a broad enough sense so that all aspects of relevant work can be funded by proceeds of the levy.
Stage 3 is scheduled for the afternoon of Thursday 12 March.
Andrew Feeney-Seale, SPICe research
“Housebuilding by Walker Way – geograph.org.uk – 6750612” by Hugh Venables is licensed under CC BY-SA 2.0.