Annex C: methodology note
Source: gov.uk (2025-07-10)

This note explains how the levy rates were calculated.

Building Safety Levy – rate calculation methodology

The Building Safety Levy is required to contribute towards the necessary funds to address building safety issues on buildings that require remediation. The levy rate has therefore been calculated and set by central government to raise those funds. The estimated target for the levy is £3.4 billion to be raised over around 10 years.

The levy rates have been set out in secondary legislation. We intend to review the levy every three years, with the first review beginning in year two of the levy allowing us to base the review on data and information from a full year of the levy being operational. We anticipate this would include a review of the levy rate and proposed exclusions, taking into account actual levy revenue flow, updated evidence on the anticipated total cost of remediation, and broader economic and housing market circumstances.

The levy will be charged on a per square metre basis. Standard rates per square-metre for each local authority (LA) area, as well as “previously developed land” rates per square-metre for each LA area, have been published.

LAs should use the published per square-metre levy rates to calculate the levy charge for a development where an application for building control approval is made or an initial notice submitted, based on the chargeable floorspace, previously developed land designation, and the application of any exclusions.

The levy will go live in October 2026. It is anticipated that, in the first year of operation, receipts will be relatively low, with revenue increasing over years 2 to 6 of the levy when it will reach a “steady state”. This is because there will be some developments reaching completion in the first year which were begun before the launch of the levy, and therefore will not be subject to the levy charge.

Levy rates have been calculated to take account of differences in housing development economics across LA areas, and across previously and non-previously developed land, whilst raising the revenue required for remediation work.

The following five steps summarise the calculation of levy rates.

Step 1 – estimate number of housing units in scope: We have established the average number of housing completions on previously developed land and not previously developed land from the three years 2020/21-2022/23, in each LA area. Then subtracted the number of excluded housing units:

Change of use

Affordable housing

Small sites (fewer than 10 units)

Market sale properties developed by Private Registered Providers (PRPs)

This obtains an estimate of the number of housing units in scope of the levy in steady state in each LA.

Step 2 – apply house price weighting: We have then applied a weighting to units in each LA, which is proportional to the average house price in that LA relative to the England average house price.

For example, a unit in an LA where average house prices are double the England average has been given twice the weighting of a unit in an LA where house prices are equal to the England average house price. An LA where house prices are equal to the England average has been given a weighting of 1.

Step 3 – apply previously developed land weighting: Units which are constructed on previously developed land have been given a weighting reduced by 50% in each LA.

Steps 1 to 3 provide a weighted number of units in scope of the levy in each LA.

Step 4 – divide initial “target” revenue by weighted units in scope: An annual levy revenue target has been set at £400m per annum. This is an initial “target” formed for the basis of calculating rates, as opposed to the amount necessarily expected to be raised. It is higher than simply dividing £3.4bn by ten for a number of reasons, including that revenue generation will be lower in the early years, as outlined above and having to account for the tax gap – the difference between the estimated amount of levy to be generated and the amount that is received by LAs due to factors including avoidance, error, evasion and non-payment.

This £400m is divided by the weighted number of units in scope of the levy, to establish the average levy rate per-unit in England on land that has not been previously developed. This represents the levy rate on an average size property on land that has not previously been developed in an LA where average house prices are in line with the England average.

This average levy rate was then multiplied by the LA level weightings outlined above to determine the per-unit LA rates and LA “previously developed land” rates for an average size property in each LA.

Step 5 – calculate per square metre rates: The per-unit LA rates and LA “previously developed land” rates were then divided by the average size (in square metres) of new residential properties constructed in that LA, to determine the per square-metre levy rate, and the per square-metre levy rate for developments on previously developed land. Levy rates are therefore proportional to the average per square-metre value of properties in each LA.