Chancellor Rishi Sunak has confirmed a 4 per cent property developer tax to fund its £5bn package to replace unsafe cladding for leaseholders in high-rise buildings across England.
The new tax, called the 'Residential Property Developer Tax', will apply to firms earning more than £25m a year from next year.
The tax, announced back in February, was not given a rate until today (October 27) in Sunak's Budget.
The tax, applied over a 10-year period starting next year, is expected to raise £2bn over its lifetime to pay for removing unsafe cladding on high-rise buildings.
In April, the government issued a consultation on the tax. It acknowledged the need to identify and track losses relating to residential property development activities from the 2022 commencement date.
It also acknowledged the need to consider how loss carry-forward rules deal with the potential for groups of property developers to fall in and out of the scope of the tax due to the £25m allowance.
Campaigners have warned the £2bn set to be raised by this tax is not enough to fix the problem, having estimated the bill closer to anywhere upwards of £10bn.
The tax is one of two levies designed by the government to fund its £5bn package. The other is the Building Safety Levy, which was announced alongside the RPPDT in February.
Developed by the department for levelling up, housing and communities, the other tax is a one-off charge applied to developers who seek regulatory permission to build certain high-rise residential buildings in England from 2023 onwards.
It is unclear how much this second tax will raise, in tandem with the RPPDT.
In July, the government set up a new regulator to oversee the UK’s cladding safety regime, with a focus on reigning in property developers.
Called the Building Safety Regulator, the new body was designed to protect residents and landlords by acting as a vehicle to prosecute property developers which fail to meet the government’s cladding safety standards.