Betterment levy (UK)

Betterment levy in the UK is a tax imposed on the increase in land value resulting from public infrastructure projects or changes in land use regulations.
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Updated on May 31, 2024
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3 key takeaways

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  • Betterment levy is a tax on the increased value of land due to public investments or regulatory changes.
  • The tax aims to recapture some of the value created by public investments for the community.
  • It was historically used in the UK but has been replaced by other mechanisms like the Community Infrastructure Levy (CIL).

What is betterment levy?

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The betterment levy is a concept in land taxation where a tax is imposed on the increase in the value of land that arises from public infrastructure projects or changes in planning regulations. This concept is based on the idea that public investments, such as new roads, public transportation, or zoning changes, can significantly enhance the value of nearby private land. The levy aims to ensure that the community benefits from these value increases rather than allowing landowners to reap all the rewards.

Historically, the betterment levy was introduced in the UK in the mid-20th century to capture some of the uplift in land values created by public efforts. Although the betterment levy as originally implemented is no longer in use, the principle behind it continues to influence current policies and land value taxation methods.

Historical context and evolution

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  • 1947 Town and Country Planning Act: The betterment levy concept was first introduced in the UK through this act, which aimed to tax the increase in land value resulting from the granting of planning permission. However, it faced various challenges and was abolished in 1953.
  • 1967 Land Commission Act: A new betterment levy was introduced to capture increases in land value due to public development. This levy was also short-lived and was repealed in 1970.
  • Modern Applications: While the original betterment levies are no longer in place, the principle persists through mechanisms like the Community Infrastructure Levy (CIL) and Section 106 agreements, which require developers to contribute to local infrastructure and community projects.

Modern applications and alternatives

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  • Community Infrastructure Levy (CIL): Introduced in 2010, the CIL allows local authorities in England and Wales to charge developers a levy to fund infrastructure needed to support new development. This levy is based on the increase in land value from granting planning permissions, aligning with the betterment principle.
  • Section 106 Agreements: These are legal agreements between local authorities and developers, requiring developers to provide contributions towards local infrastructure, affordable housing, and other community benefits as part of the planning permission process.

Real world application

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The principles behind the betterment levy continue to shape how local governments in the UK manage the relationship between public investments and private land value increases. For example, when a new public transportation project is planned, local authorities may use CIL or Section 106 agreements to ensure that developers contribute to the costs of new infrastructure that will benefit their developments.

An example of this can be seen in large urban redevelopment projects where significant public investment in infrastructure, such as new train stations or road networks, leads to substantial increases in the value of surrounding land. Through mechanisms like CIL, local governments can capture some of this increased value to fund further infrastructure improvements and community projects.

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If you are interested in learning more about land value taxation and public infrastructure funding, consider exploring these topics:

  • Community Infrastructure Levy (CIL): A modern application of the betterment principle in funding local infrastructure.
  • Section 106 Agreements: Legal agreements requiring developers to contribute to local community benefits.
  • Land Value Taxation: A broader concept of taxing land based on its value to capture economic rents.
  • Urban Planning and Development: The processes and regulations involved in planning and developing urban areas.

These related topics provide a broader understanding of how public investments and regulatory changes can impact land values and the mechanisms used to ensure that these benefits are shared with the community.


Sources & references

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