Spending the levy: the neighbourhood proportion

Fifteen per cent of the Community Infrastructure Levy collected from development in a parish goes to that parish council, and 25 per cent goes to it where a neighbourhood plan has been made. That is the neighbourhood proportion, and it is the part of the levy that local people have the most say over, because it can be spent on a wider range of things than the rest of the levy and because the body spending it is the one you can walk into on a Tuesday evening.

The rules sit in the Community Infrastructure Levy Regulations 2010, and they are shorter than people expect.

How the levy is divided

A charging authority, usually the district, borough or unitary council, collects the levy on new floorspace at rates set in a charging schedule. That money is then split three ways.

The largest share stays with the charging authority and must be spent on infrastructure to support the development of its area: schools, roads, health facilities, open space, flood defences and so on.

A small share, capped by the regulations, may be kept to cover the cost of administering the levy.

And the neighbourhood proportion is passed on. Where there is a parish or town council, the money goes to it. Where there is not, the charging authority holds it but has to engage with the community about how it is spent.

Note that this is the levy, not section 106. Obligations under section 106 are negotiated scheme by scheme and tied to specific requirements, and our note on which agreement secures what sets out the difference.

The proportion, and the cap

The cap is the part that surprises people. In a parish of 400 homes, the capped 15 per cent share cannot exceed £40,000 in a year however much development takes place. Making a neighbourhood plan removes the cap and raises the share, which is the strongest practical argument for going through that process in an area facing substantial growth.

Payments are passed over twice a year, in April and October, covering the receipts of the preceding six months. A parish treasurer who is not expecting them sometimes does not notice what has arrived.

What it may be spent on

The main levy must be spent on infrastructure. The neighbourhood proportion has a wider test: it must be used to support the development of the area, by funding the provision, improvement, replacement, operation or maintenance of infrastructure, or anything else that addresses the demands that development places on the area.

That second limb is deliberately broad. It has supported village hall refurbishments, play equipment, allotment improvements, footpath and cycleway links, speed reduction measures, defibrillators, burial ground extensions, community transport and tree planting. An Open Space Assessment prepared for a scheme in the parish will often identify exactly the sort of deficiency the money can address.

What it cannot be used for is anything unconnected with the demands of development. Topping up the parish precept, funding routine administration or paying for something the parish wanted anyway with no link to growth will not survive scrutiny.

The spending decision is the parish council's, taken at a meeting, in public, with minutes. That is the point at which a resident has the most influence over levy money anywhere in the system.

Reporting duties

A parish council that receives levy money has to publish a report for each financial year in which it received or held any, by 31 December following the end of that year. The report has to show the total received, the total spent, a summary of what it was spent on, and the amount retained at year end.

Charging authorities have a parallel duty to publish an infrastructure funding statement each year, covering levy and section 106 income and spending across the whole authority.

Both documents are public, and together they answer the question residents most often ask, which is where the money from that development actually went. If a parish report is missing, ask for it.

The five year rule

The neighbourhood proportion is not a savings account without limits. Where a parish council has not spent the money within five years of receiving it, or has spent it on something outside the permitted purposes, the charging authority may require it to be repaid.

Small parishes often need to save for several years to fund anything meaningful, and that is allowed, but the clock matters. Keep a schedule showing the date each tranche was received and the date by which it must be committed, and plan the larger projects around it.

Pooling with a neighbouring parish for a shared project is possible and underused. So is using the money as match funding for a grant, which turns a modest sum into a larger one.

Influencing local spending

For a resident or a community group, the route is straightforward and often unexploited:

1. Find out how much the parish has received, from the parish report and from the authority's infrastructure funding statement.
2. Ask when the next tranche is due, since the payment dates are fixed.
3. Put a proposal to the parish council in writing, with a cost and a clear link between the project and the pressures that development has created.
4. Attend the meeting where it is discussed, because written proposals without a person behind them tend to be noted and deferred.
5. If the parish runs a consultation on spending priorities, respond to it, and encourage others to.

The link to development is the part most proposals get wrong. "The village needs a better playground" is weaker than "the new estate has added 40 homes with young families and the existing playground has two pieces of equipment for under-fives", which is the kind of case a Play Space Assessment for a nearby scheme will already have made in numbers.

Where there is no parish council

Much of urban England is unparished. There the charging authority keeps the neighbourhood proportion and has a duty to engage with the communities in which the development took place about how best to spend it.

In practice authorities handle this very differently: some run ward-level participatory budgeting, some consult through area committees, some do very little. Ask your council how it discharges the duty and what it has spent the neighbourhood element on in your ward. The infrastructure funding statement is the document to start from.

Where the reform stands

The Levelling-up and Regeneration Act 2023 contains powers to replace the levy with an Infrastructure Levy, with a neighbourhood share carried forward in the design. As at 1 October 2026 those powers have not been brought into force in a way that replaces the existing levy, and the Community Infrastructure Levy Regulations 2010 continue to govern. Verify the position before relying on it, and follow the planning law updates timeline for changes.

An illustrative example: a parish of 620 homes with a made neighbourhood plan received the uncapped 25 per cent share from a 90 home development. Over three years it funded a footway link to the primary school, a replacement play area and a contribution towards a village hall roof, all three traceable to pressures the plan had identified. The decisions took four meetings.

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