The Building Safety Levy: what SME developers and contractors need to know

For SME developers and contractors, this represents an additional project cost and compliance requirement that must be factored into viability, procurement, and programme planning.

The BSL is part of a broader regulatory shift following the Building Safety Act 2022, aiming to ensure that the industry contributes to improving building safety standards across existing housing stock.

1. When Will the BSL Be Implemented?

• The BSL will come into force on 1 October 2026.
• It applies to:
  • Building control applications submitted on or after that date.
• It does not apply to:
  • Applications submitted before 1 October 2026, even if works are ongoing.
  • Variations of pre-existing applications (you may want to verify this nuance in practice where schemes evolve significantly).

Practical takeaway:

• Schemes submitted before October 2026 may avoid the BSL, but timing strategies should be carefully assessed against delivery risk.

2. Who Must Comply with the BSL?

Key Liable Party

• The “client” (as defined in building regulations and named in the building control application) is responsible for paying the BSL.

In practice, this will typically be:

• Developers; and
• Employers under design-and-build contracts.

Scope of Development

The BSL applies where all three conditions are met:

• Major residential development:
  • 10 or more dwellings, or
  • 30+ student accommodation bedspaces
• Creation of new residential floorspace:
  • New build
  • Conversions (e.g. office to residential)
  • Extensions increasing residential space
    • Including communal areas used in the development.
• Non-exempt client:
  • Private developers generally included
  • Certain organisations excluded (see below)

It is important to note that all three charging conditions must be met for the works in application to be chargeable to the BSL. 

Key Exemptions

The BSL does not apply to:

• Developments by non-profit registered providers of social housing.
• Small developments:
  • Fewer than 10 dwellings (unless part of a wider major scheme).
• Certain uses, including:
  • Social housing;
  • Supported housing; and
  • Hospitals, care homes, hotels, schools, and similar uses.

Important nuance: you cannot avoid the BSL by subdividing schemes into smaller applications if they form part of a larger consent.

3. How Developers and Contractors Comply

When the BSL Is Paid

• The BSL becomes payable as part of the building control process, before:
  • Completion of works; or
  • Occupation (whichever is earlier). 

How It Is Calculated

• Based on:
  • Chargeable floorspace (m²)
    • Measured by Gross Internal Area (GIA).
  • Local authority rates, which vary geographically
• Rates are set in legislation and weighted by local house prices
• The BSL applies to developments in England only, though the Scottish Government has announced plans to introduce a Scottish Building Safety Levy from 1 April 2027. 

Note: the exact £/m² figures vary by authority. The applicable rate should be verified against the relevant authority statutory instrument or local authority schedules. 

Who Collects the BSL

• The local authority acts as the collecting authority.
• It applies regardless of the building control route (local authority, Approved Inspector/RBCA, or Building Safety Regulator).

Key Compliance Steps

Developers should expect to:

• Submit BSL information with building control applications.
• Receive a levy liability notice confirming the amount payable.
• Pay the BSL before completion or occupation.
• Provide confirmation of payment through a levy liability statement.

Managing Changes

• If a scheme changes (e.g. floorspace or tenure mix), a levy update notice may be required.
• Liability may be recalculated accordingly.

4. Key Risks and Considerations for SMEs

• Viability impact:
  • Additional cost tied to floorspace and location.
• Programme risk:
  • Payment required before completion could affect cashflow.
• Planning vs building control interaction:
  • Levy triggered via building control but linked to planning status.
• Structuring limitations:
  • Anti-avoidance approach to phased or segmented schemes. 

Closing Remarks

The Building Safety Levy represents a structural shift in how residential development is funded in England, with direct financial implications for SME developers and contractors.

While the framework is now set in legislation, practical implementation may evolve as local authorities implement the regime from October 2026. The current Government guidance (published 10 July 2025) may be updated, or secondary guidance may be published as the industry approaches rollout of the BSL. 

For further information or guidance, you can reach out to our Construction and Engineering Team and our Tax and Trust Compliance Team for further information and guidance on the BSL and how to plan for its imminent rollout.