The proposed tax on the largest residential property developers is set to raise at least £2 billion to help contribute to the cost of cladding remediation work across the UK.
Ministers announced the new tax in February as part of a £5 billion package of remediation of unsafe cladding on high-rise residential buildings, alongside wider support. February’s announcement included the government pledging to fully fund the cost of replacing unsafe cladding for all leaseholders in residential buildings 18 metres and over in England.
To help pay for these interventions the government is introducing the residential property developer tax and a new Gateway 2 levy, which will be applied when developers seek permission to develop certain high-rise buildings in England.
The government believes it is right that residential property developers, who will benefit from the restoration of confidence to the housing market, should help fund the significant costs associated with the removal of unsafe cladding.
Investing over £5 billion will help protect leaseholders from the cost of replacing unsafe cladding on their homes and ensure industry is held to account for the wrongs of the past, Housing Secretary Rt Hon Robert Jenrick MP said. Given the significant costs associated with the removal of unsafe cladding, it is right to seek a fair contribution from the largest developers in the residential property development sector to help fund it, Financial Secretary to the Treasury Jesse Norman added.
The government wants to ensure this tax is proportionate and works as intended, which is why it is launching this consultation today. The government is calling for views on proposed design features of the tax including proposals that:
- it would apply to a measure of developers’ profit from UK residential development
- it would only apply to in-scope profits over £25 million
- it would apply to conversion of existing buildings as well as new construction
The consultation can be found here.
The new tax will be UK-wide, reflecting the benefit that housing developers will derive from restoring confidence to the housing market across the UK.
Ministers intend to set out the rate of the tax at a future fiscal event. The time-limited tax is due to apply from 2022 and is intended to raise at least £2 billion over a decade.