Property Developer Accountant in London: Budgeting for the Building Safety Levy From 1 October 2026

What is the Building Safety Levy and why has it been introduced?

The Building Safety Levy is a new charge on housebuilding in England. The government created it under the Building Safety Act 2022, and the detailed rules sit in the Building Safety Levy (England) Regulations 2025, which were made on 19 November 2025. The levy comes into operation on 1 October 2026.

The purpose is simple. Since the Grenfell Tower fire, thousands of residential buildings have needed remedial work to unsafe cladding and other fire safety defects. The government has decided that the residential development industry, rather than only the taxpayer, should contribute to that cost. During the House of Lords debate on the regulations on 15 October 2025, the minister, Baroness Taylor of Stevenage, said the government estimates it needs to raise around £3.4 billion over 10 years through the levy. She also noted that the government had already committed £5.1 billion of taxpayers’ money to remediation. You can read the full exchange in the Hansard record of the Building Safety Levy debate.

The scale of the problem explains why the levy is arriving now. In the same debate, Lord Young of Cookham quoted government remediation data showing that, of the 5,554 buildings covered by the Act, only 35% had completed their works and 14% had works under way. Put plainly, around half still had not started. The levy is designed to fund that gap over the next decade.

For developers, the practical point is that the Building Safety Levy is a new line in your development appraisal. It is not optional, it is not negotiable with the council, and it will sit on the critical path to getting your completion certificate.

Does the Building Safety Levy apply to my development?

The levy applies when all the charging conditions in the regulations are met. According to the GOV.UK Building Safety Levy guidance, the key tests are these.

Is it a major residential development?

A major residential development means 10 or more new dwellings, or 30 or more new bedspaces where the scheme is purpose built student accommodation (PBSA). Developments below those thresholds are exempt. Importantly, the test looks at the planning permission, not just the individual building control application. If your planning permission is for 14 flats and you split the building control work into two applications of 7, the levy still applies. You cannot avoid it by dividing the job up.

When was the building control application submitted?

The levy applies to applications for building control approval submitted on or after 1 October 2026. Applications submitted before that date are outside the levy, and later variations to those existing applications do not bring them into scope. However, if an application submitted before 1 October 2026 is rejected for failing to meet the required standards and you resubmit it on or after that date, the resubmitted application will be liable.

Is any of the housing exempt?

Certain housing is excluded from the charge, even inside a scheme that is otherwise caught. The main exclusions are:

1. Social housing, including most affordable rent, social rent and intermediate rent homes provided by a local authority or registered provider, and shared ownership homes that meet the conditions.
2. First Homes sold at no more than 70% of market value, where the planning obligation conditions are met.
3. Supported housing.
4. Exempt uses such as care homes, hospitals, schools, hotels, prisons, armed forces accommodation and temporary accommodation for homeless people.

A scheme of 10 or more homes still counts as a major residential development even if some of those homes are exempt. The exempt homes simply do not attract the charge. So a 20 unit scheme with 6 affordable homes will pay the levy on the floorspace of the 14 market homes and the shared areas that serve them.

Who actually pays?

The person liable is the client named in the building control application or initial notice. For most of our developer clients that is the development company or special purpose vehicle (SPV), meaning a limited company set up to hold a single project. Make sure the right entity is named, because the liability follows the name on the application.

How is the Building Safety Levy calculated?

The calculation itself is straightforward. The GOV.UK guidance on levy rates and calculations sets it out as:

Chargeable floorspace (m²) × levy rate for your local authority (£ per m²) = levy charge

There are three things to get right.

1. Chargeable floorspace. This is the new residential floorspace your works will create, measured as gross internal area (GIA). GIA is the whole floor area inside the external walls, so it is larger than the net saleable area your agent quotes.
2. Communal areas. Shared areas that serve the residents are chargeable. The guidance gives stairways, lobbies, landings and plant rooms as examples, and a residents only gym would count too. Areas open to the general public are not chargeable.
3. The rate. Each local authority has two rates: a standard rate and a previously developed land rate. The previously developed land rate is exactly half the standard rate.

What counts as previously developed land?

Previously developed land, often called brownfield land, is land that has a building on it, or had a building on it at any point on or after 1 July 1948. There are exceptions, including agricultural or forestry buildings, land used for mineral extraction or landfill, and buildings that are wholly underground. Any scheme delivered through permitted development rights, such as an office to residential conversion, is charged at the previously developed land rate automatically. For most London and Essex infill and conversion schemes, the 50% discount is likely to apply, but you need evidence of the site’s history before you rely on it.

What are the levy rates in London and Essex?

Rates vary sharply across the capital because they broadly track local house prices. The table below shows the published rates for the areas where our clients most often build, taken from the rate table in the GOV.UK guidance.

Source: GOV.UK, Building Safety Levy guidance, Section 2, table of levy rates by local authority. Rates checked September 2026. Always confirm the current rate for your site before finalising an appraisal.

The spread matters. The same building would cost more than twice as much in levy in Kensington and Chelsea as it would in Barking and Dagenham. The lowest rate in England, in Burnley, is £13.60 per square metre at the standard rate. If you are comparing sites across London and Essex, the levy is now one of the variables that should feed into that decision.

How much will the levy cost on a typical scheme?

Here is an illustrative example. It uses rounded, made up floor areas purely to show the arithmetic, not any real client scheme.

A developer plans 12 private flats in Ilford, in the London Borough of Redbridge. The flats total 900 m² of GIA, and the shared stair cores, lobbies and bin and plant rooms add a further 150 m². Chargeable floorspace is therefore 1,050 m².

1. Greenfield or not previously developed: 1,050 m² × £57.02 = £59,871.
2. Brownfield, previously developed land: 1,050 m² × £28.51 = £29,935.50.

Move the same building to other parts of our patch and the brownfield figure changes as follows:

1. Wimbledon, in Merton: 1,050 m² × £29.51 = £30,985.50.
2. Old Street, on the Islington side: 1,050 m² × £39.52 = £41,496.
3. Loughton, in Epping Forest: 1,050 m² × £23.09 = £24,244.50.

On a 12 unit scheme, that is roughly £2,000 to £5,000 per flat on brownfield land, and double that on land that does not qualify. On tight margins, that can be the difference between a scheme that stacks up and one that does not, particularly where you have already agreed a land price.

When do you have to pay the levy?

Timing is where the Building Safety Levy really affects a developer’s cash flow. On the local authority building control route, the process runs like this:

1. Building control application. You submit the application for building control approval, including the levy information the regulations require.
2. Commencement notice. When you give notice that work has started, you provide the levy information for the works.
3. Levy liability notice. The collecting authority calculates the charge and issues a levy liability notice, or a notice of no charge, within 5 weeks of the commencement notice. That extends to 8 weeks if it carries out a spot check.
4. Payment window. You can pay at any point between receiving the liability notice and notifying completion.
5. Completion. When you notify completion you must give a levy liability statement confirming the levy has been paid in full. The whole charge for the application must be paid before a completion certificate can be issued for any of the works in it.
6. Payment certificate. Once the full amount is paid, the collecting authority issues a levy payment certificate within 2 weeks. Keep it with your project records.

There is a similar process where a registered building control approver handles the job, and for higher risk buildings that go through the Building Safety Regulator. If you disagree with the calculation, the regulations allow you to request a review and then appeal to the First-tier Tribunal.

The key message is that the levy falls due at the end of the build, exactly when your cash is at its tightest. You may be carrying peak development finance, retentions and final contractor payments, and you cannot complete sales or draw down a refinance until the completion certificate is issued. If the levy has not been paid, the certificate will not be issued.

How should developers budget for the levy?

We regularly see developers in East London and Essex plan well for the build cost and the finance cost, then get caught out by the charges that arrive right at the end. The Building Safety Levy is exactly that kind of charge. Here is how we recommend budgeting for it.

1. Measure the GIA early. Ask your architect for a gross internal area schedule, split between private homes, exempt homes and communal areas. Do not use net saleable area.
2. Confirm your rate. Check the local authority rate and whether the site qualifies as previously developed land. Keep evidence of historic buildings on the site.
3. Add the levy as its own appraisal line. Show it separately from build costs and professional fees so your funder can see it clearly.
4. Tell your lender now. Development lenders will want to know how the levy is funded. Agree whether it will be drawn from the facility or funded by equity, because the completion certificate depends on it.
5. Put it in your cash flow forecast in the right month. Model payment just before practical completion, alongside final contractor payments and retention releases. Our guide to building a construction cash flow forecast for your next project explains how to lay this out month by month.
6. Revisit land deals and option agreements. If you are still negotiating a land price, the levy is a genuine new cost that affects residual land value. Factor it in before you exchange.
7. Plan for changes. If the design changes after commencement and the floorspace goes up, the charge can be revised. Keep your GIA schedule updated.
8. Check the timing of your application. Schemes where building control applications are submitted before 1 October 2026 are outside the levy. Make sure any application you rely on is valid and complete, because a rejected application resubmitted after that date will be caught.

How is the levy treated in your accounts and tax return?

This is the question most competitor guides skip, and it matters for your profit and your Corporation Tax bill. At the time of writing we are not aware of HMRC guidance written specifically for the Building Safety Levy, so the treatment follows general principles and depends on what your company does with the finished homes.

If you build to sell

For a trading developer, the levy is a cost of producing the development. It should sit in work in progress and then in the cost of the units sold, in the same way as your build costs and planning fees. In practice that means you get relief for it when the units are sold and the profit is recognised, not in the year you pay it. That timing gap is another reason to include it in your cash flow planning.

If you build to let

If your company is building a block to hold and rent out, the levy is part of the cost of creating a capital asset. It is unlikely to be deductible against rental income. Instead it should form part of the cost of the building, which becomes relevant when the property is eventually sold and the gain is calculated.

Which structure should carry the liability?

Because the liability follows the client named on the building control application, the entity you choose matters. Many developers use a separate SPV for each scheme so that costs, finance and tax are ring fenced. If you are weighing up structures, our article comparing a limited company SPV with holding property in your personal name explains the main trade offs.

What mistakes should developers avoid?

From the schemes we see across London and Essex, these are the errors most likely to cost money under the new rules:

1. Budgeting on net saleable area rather than gross internal area, which understates the charge.
2. Forgetting that communal areas are chargeable.
3. Assuming the brownfield rate applies without checking the site’s history against the definition.
4. Splitting a scheme into smaller building control applications in the belief that it avoids the threshold. The test looks at the planning permission.
5. Leaving the levy out of the development finance request, then having to find the cash from elsewhere at completion.
6. Naming the wrong company as the client on the application, so the liability lands in an entity that has no funds.
7. Treating the levy as an immediate tax deduction in the year it is paid, when for a trading developer it normally belongs in the cost of the units sold.

What other changes should developers watch in 2026 and 2027?

The levy regime is still settling in. Draft amendment regulations, the Building Safety Levy (Amendment) (England) Regulations 2026, were laid before Parliament on 2 July 2026. The government says they make minor changes, and the GOV.UK guidance already reflects them, subject to Parliamentary approval. Collecting authorities are also setting up their own payment arrangements, so expect local variation in how you are invoiced and how you pay.

We will keep our clients informed as the first liability notices are issued in late 2026 and into 2027, and as the collecting authorities publish their local processes.

How can a property developer accountant in London help?

The Building Safety Levy is a planning and cash flow problem as much as a compliance one. As a property developer accountant in London, GM Professional Accountants helps developers to:

1. Build the levy into development appraisals and lender cash flow forecasts.
2. Structure each scheme through the right company or SPV.
3. Account for the levy correctly in work in progress and cost of sales.
4. Prepare year end accounts and Corporation Tax returns that reflect the levy properly.
5. Review the numbers on land deals before you commit.

You can find out more about our accounting services for property developers. GM Professional Accountants serves clients across London and Essex, from our offices in Ilford, Old Street, Wimbledon and Loughton.