The Annual Tax on Enveloped Dwellings (ATED) is a yearly tax charged on UK residential properties valued at more than £500,000 when they are owned (or “enveloped”) by a company, partnership with a corporate member, or collective investment scheme. The tax was introduced in Finance Act 2013 to discourage the practice of holding residential property through corporate structures to avoid stamp duty and inheritance tax.
ATED applies regardless of whether the property is located in England, Wales, Scotland or Northern Ireland.
Who Pays ATED?
ATED applies to non-natural persons (NNPs) that own UK residential property above the threshold. This includes:
| Entity type | Subject to ATED? |
|---|---|
| UK companies | Yes |
| Overseas companies | Yes, if they own UK residential property |
| Partnerships with at least one corporate partner | Yes |
| Collective investment schemes | Yes |
| Individuals | No |
| Partnerships of individuals only | No |
| Registered charities (meeting conditions) | Relief available |
| Open-ended investment companies (meeting conditions) | Relief available |
ATED Rates and Bands
ATED is charged on a banded scale based on the property’s value. Each band has a fixed annual charge, and the chargeable period runs from 1 April to 31 March. The bands are:
| Property value band |
|---|
| £500,001 to £1 million |
| £1,000,001 to £2 million |
| £2,000,001 to £5 million |
| £5,000,001 to £10 million |
| £10,000,001 to £20 million |
| Over £20 million |
The annual charge for each band rises every year in line with the Consumer Prices Index (CPI). HMRC publishes the charges for the current chargeable period on GOV.UK before it starts.
Property Valuations
Revaluation Dates
ATED values are based on the property’s open market value at revaluation dates fixed in law, which fall every five years. Each valuation applies from the chargeable period that begins a year after the revaluation date and stays in use until the next one takes effect.
Properties acquired after the latest revaluation date are valued at their acquisition cost until the next revaluation date.
When to Revalue
| Situation | Valuation basis |
|---|---|
| Property owned at the latest revaluation date | Open market value at that date |
| Property acquired after the latest revaluation date | Acquisition cost (including SDLT and acquisition costs) |
| Property significantly altered | Professional valuation at the date of alteration |
If the property value crosses a band boundary at a revaluation date, the ATED charge changes from the next chargeable period.
ATED Reliefs
Several reliefs are available that can reduce or eliminate the ATED charge. Importantly, most reliefs must be claimed by filing an ATED return; they are not applied automatically.
| Relief | Conditions |
|---|---|
| Property rental business | Property is commercially let, or genuinely available for let, to an unconnected third party |
| Property development | The company acquired the property for development and sale, and development is being actively carried on |
| Property trading | The property is held as trading stock |
| Occupation by employees | The property is made available to employees (not directors or connected persons) for business purposes |
| Farmhouses | Occupied by a qualifying farm worker in connection with a farming trade |
| Open to the public | The property is open to the public for at least 28 days per year |
| Registered social landlord | Property owned by a registered provider of social housing |
Property Rental Relief
This is the most commonly claimed relief. To qualify:
- The property must be let on a commercial basis to an unconnected person
- Or it must be genuinely available for let and the company is taking active steps to let it
- Short periods of vacancy between tenancies do not disqualify the relief, provided the property is being actively marketed
Relief Declarations
Where a relief applies for the full chargeable period, the company can submit a relief declaration return instead of a full ATED return. This is a simplified filing that declares the applicable relief.
Filing and Payment
ATED Return
An ATED return must be filed with HMRC for each property within the charge:
| Deadline | Requirement |
|---|---|
| 30 April | File ATED return and pay the charge for the chargeable period starting 1 April |
| New property acquired during the year | File within 30 days of acquisition if the property falls within ATED |
| Property ceases to be within ATED | File an amended return |
Penalties for Late Filing
| Default | Penalty |
|---|---|
| Return up to 3 months late | £100 |
| Return 3 to 6 months late | £100 + daily penalties of £10 per day (up to 90 days) |
| Return 6 to 12 months late | Additional 5% of tax due (or £300, if greater) |
| Return over 12 months late | Further penalties based on behaviour |
Late payment interest also accrues from the due date.
ATED and Other Taxes
Corporation Tax
ATED is not deductible for corporation tax purposes. It is treated as a tax on the holding of the property, not as a business expense.
Capital Gains on Disposal
The separate ATED-related capital gains tax charge was abolished from 6 April 2019. Since then, a company’s gain on selling a UK residential property falls within corporation tax in the same way as other chargeable gains, whether or not the property was within ATED.
Stamp Duty Land Tax
Companies purchasing residential property above £500,000 may also face a flat higher rate of SDLT on the whole price (rather than the standard residential rates). The same reliefs that apply for ATED purposes generally apply to claim relief from this higher rate.
Accounting Treatment
The ATED charge is an annual tax liability. In the company’s accounts:
| Treatment | Detail |
|---|---|
| P&L | Recognised as an expense (typically within administrative expenses or as a separate tax line) |
| Balance sheet | Any unpaid ATED is shown within creditors (amounts falling due within one year) |
| Disclosure | Material ATED charges should be disclosed in the notes if they significantly affect the reported results |
Practical Considerations
Pre-Return Valuation
Obtaining a professional valuation at each revaluation date is important for properties near a band boundary. A small difference in valuation can move the property into a higher or lower band, changing the annual charge significantly.
Companies Holding Multiple Properties
Each property is assessed separately. A company owning five properties must file five separate ATED returns (or relief declarations). The charges are not aggregated.
Offshore Companies
ATED applies to overseas companies owning UK residential property in the same way as UK companies. There is no exemption for non-UK entities, and HMRC actively pursues compliance.
ATED is a narrowly targeted tax, but for companies that hold UK residential property the charges are substantial. Filing obligations apply even when a relief eliminates the charge, making awareness and compliance essential.