What is ATED and how it could impact property owners
The Annual Tax on Enveloped Dwellings (ATED) is a tax that many property owners may not be aware of, but it can have significant financial implications. We’ll look at the key aspects of ATED and why property owners must understand its impact.
What is ATED?
ATED is an annual tax on UK residential dwellings that are not owned by individuals (also known as non-natural persons).
The tax applies to properties valued at more than £500,000.
It was introduced in 2013 as an anti-avoidance measure to discourage corporate ownership of high-value residential properties.
Who needs to pay ATED?
Companies that own UK residential property valued above the threshold are liable for ATED. If at least one partner in a partnership is a company, then ATED is also payable by the partnership. Additionally, collective investment schemes, such as unit trusts or open-ended investment vehicles are also subject to ATED.
What constitutes a dwelling for ATED purposes?
Your property is classed as a dwelling for ATED if all or part of it could be used as a residence.
Some properties are not classed as dwellings. These include:
- hotels
- guest houses
- boarding school accommodation
- hospitals
- student halls of residence
- military accommodation
- care homes
- prisons
If you have mixed use properties, you can review Section 19 of the ATED technical guidance which explains more about the meaning of ‘dwelling’.
ATED charges and valuation
ATED is worked out based on property value bands, ranging from £4,400 to £269,450 for the 2024/25 tax year. These amounts will increase for 2025/26:
| Property Value | 2024/25 | 2025/26 |
| £500,000 - £1,000,000 | £4,400 | £4,450 |
| £1,000,001-£2,000,000 | £9,000 | £9,150 |
| £2,000,001 - £5,000,000 | £30,550 | £31,050 |
| £5,000,000 - £10,000,000 | £71,500 | £72,700 |
| £10,000,000 - £20,000,000 | £143,550 | £145,950 |
| Over £20,000,000 | £287,500 | £292,350 |
Properties must be revalued every 5 years, with the most recent valuation date being 1 April 2022. You can check the ATED value of your property on the HMRC website.
Self-assessment is required, but HMRC offers Pre-Return Banding Checks for properties near band thresholds.
ATED returns and deadlines
Returns must be submitted annually by 30 April for the upcoming chargeable period. The chargeable period runs from 1 April to 31 March of the following year. Even if relief is claimed, you must submit a return to avoid penalties. ATED returns can be made online using your Government Gateway account.
Reliefs and exemptions
Reliefs are available for properties used for commercial purposes, such as rental businesses or property development.
You may be able to claim relief for your property if it is:
- let to a third party on a commercial basis and is not, at any time, occupied (or available for occupation) by anyone connected with the owner
- open to the public for at least 28 days a year
- being developed for resale by a property developer
- owned by a property trader as the stock of the business for the sole purpose of resale
- repossessed by a financial institution as a result of its business of lending money
- acquired under a regulated home reversion plan
- being used by a trading business to provide living accommodation to certain qualifying employees
- a farmhouse occupied by a farm worker or a former long-serving farm worker
- owned by a registered provider of social housing or a qualifying housing co-operative
More information on ATED reliefs and exemptions is available on the HMRC website.
Penalties and appeals
You could be charged a penalty and interest if:
- you do not file your return on time
- you do not pay on time — find out more in CH155400 of the HMRC Compliance Handbook
- you submit an inaccurate return.
Appeals
If you disagree with an HMRC decision about your return, for example a penalty or determination, you may be able to challenge it by appealing.
You have 30 days from the date of the decision to write and tell HMRC the grounds on which you’re appealing.
Conclusion
Understanding ATED is crucial for company owners and investors in UK residential property. While it may seem complex, being aware of your obligations can help you avoid unexpected tax liabilities and penalties. Consider seeking professional advice to ensure compliance and explore potential reliefs that may apply to your situation.
Contact Adams Accountancy
Working out if you need to pay ATED
If you’re unsure if ATED applies to your property, it’s best to take professional advice. Penalties can soon mount up and HMRC could go back into your financial history if they think you should have been paying tax previously. Call us on 01322 250 001 or contact us online for a free, no-obligation chat today about Annual Tax on Enveloped Dwellings and don’t get caught out.
