HM Treasury has launched a consultation on the design of a new tax on housebuilders, designer to raise at least £2bn over 10 years to help pay for the cost of cladding remediation work.

The proposed tax, which is due to be introduced in 2022, was first announced in February, when government pledged to fully fund the cost of replacing unsafe cladding for all leaseholders in high-rise residential buildings of at least 18 metres in England. The levy would apply only to developers’ profits over £25m.

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. But it wants feedback on features of the proposed UK-wide tax.

The features include proposals that it would apply to a measure of developers’ profit from UK residential development, it would only apply to in-scope profits over £25m, and that it would apply to conversion of existing buildings as well as new construction.

Financial secretary to the Treasury Jesse Norman said: “Ending the use of unsafe cladding is a priority for the government, as it builds back better from the pandemic. 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.

“The government wants to ensure this tax is proportionate and works as intended, which is why it is launching this consultation today.”

Housing secretary Robert Jenrick has welcomed the proposed introduction of a tax and Gateway 2 levy to be applied when developers seek permission to develop certain high-rise buildings.

He commented: “We’re making the biggest improvements to building safety standards in a generation, investing over £5bn helping to protect leaseholders from the cost of replacing unsafe cladding on their homes and ensuring industry is held to account for the wrongs of the past.

“This tax will strike the right balance between developers making a contribution and ensuring fairness for the taxpayer.”