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Larger housebuilders will be required to pay 4% in tax annually on trading profits above 拢25m, Rishi Sunak has announced.

Sunak announced more detail about the residential property developer tax, which will raise 拢2bn for building safety remediation works over 10 years, in his budget speech today.

The tax will apply to trading profits on residential property development activity, which will be defined in the Finance Bill, which is currently going through parliament. It will also apply to businesses who have an interest in the land 鈥渢hat forms part of their trading stock鈥�.

The tax level was announced by Sunak as part of a package of housing measures which he termed a 鈥渕ulti-year housing settlement totalling nearly 拢24bn鈥� (see box).

As previously reported, build to rent activity will be exempt from the tax, while most housing associations, as non-profit organisations, will also be exempt on the grounds. This is because 鈥渋s possible for taxable trading profits to arise within a group that is not profit-seeking in the wider sense鈥� a government response to a consultation published alongside the budget said.

But the government said that an 鈥渆xit charge鈥� would be applied if an affordable housing body 鈥渂enefitting from the exemption ceases to qualify for it鈥�.

It said: 鈥淭he government recognises that some would have preferred a broader approach which would exempt all registered providers of affordable housing.

鈥淗owever, it believes that such an exemption is not justified on the grounds that the development of affordable housing with a view to making a profit from that activity, is clearly the development of residential property.鈥�

The tax will raise 拢200m in 2022/23, 拢215m in 2023/24, 拢225m in 2024/25, 拢235m in 2025/26 and 拢250m in 2026/27, budget documents added.