The chancellor has confirmed a new Residential Property Developer Tax of 4% which will be introduced from April 2022 to ensure that the largest developers make a fair contribution to help pay for building safety remediations.
Based on the 2020 pre-tax profits of the 10 biggest housebuilders in the UK, Sirius calculated that the new cladding tax could bring in over £102m a year, with Persimmon Homes potentially having the highest contribution of over £30m.
The second and third highest monetary input is expected to come from Berkeley Group and Barratt Homes, which could provide £19.1m and £18.6m in tax, respectively, based on the 2020 figures.
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When comparing with pre-pandemic total pre-tax figures in 2019 across all 11 housebuilders (£5.4bn), the new tax could cost them more than double at £205m a year.
Nicholas Christofi, managing director at Sirius Property Finance, said: “Yesterday’s confirmation of the Residential Property Developer Tax will come as a significant blow to Britain’s biggest housebuilders, who have fought hard to overcome pandemic uncertainty, a decline in profits, and a sharp spike in the cost of labour and materials.
“It’s clear that having promised £5bn to address the cladding crisis, the government is now reliant on the nation’s housebuilders to pay the bill, and it’s a little unfair, to say the least, to expect the entire sector to compensate for the poor practices of a few.
“It’s also likely that this latest move could inadvertently stifle housing delivery, the outcome of which is less stock reaching the market to address the current housing crisis, while high demand for those new homes that are delivered will push house prices ever higher to the detriment of the nation’s homebuyers.”