The government will introduce a new 4% tax on the largest, most profitable property developers from April 2022 to help pay for new cladding on unsafe buildings.

The tax, first touted in February 2021, forms part of a £5.1bn package that will seek to make high-rise buildings across England more secure.

Outlined in Chancellor Rishi Sunak’s budget, the levy will hit around 30 of Britain’s biggest developers, and is expected to raise around £2bn over the next decade.

The money will help to pay for the removal of unsafe cladding, and to “provide reassurance to homeowners, and support confidence in the housing market”.

The plan will only impact for-profit residential property developers, and will not apply to housing associations, care homes, or commercial developers, among others, the Treasury has said.

According to the government, the levy will only be applied to profits made by companies after £25m.

It comes after analysis of government data suggested the removal of dangerous cladding from high-risk buildings is unlikely to be complete until seven-and-a-half years after the Grenfell Tower tragedy.

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Peter Hardy, a partner at law firm Addleshaw Goddard, said that the levy would need to be “carefully worked out”.

“I imagine the announcement will make developers think carefully about how they structure themselves as a way to try and avoid or offset some of the tax,” Mr Hardy said. “The announcement could also slow down progress in the sector for a short time whilst potential taxpayers work out what this means for them.”

“There are still a lot of unanswered questions,” he added.

In response, a Treasury spokesperson said that the authorities would crack down on any company that tried to evade tax.

Activists have warned that the total bill for retrofitting unsafe cladding could total nearly £10bn, with the government’s plan to raise £2bn insufficient to cover the cost.

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