Everything you need to know about ATED

ATED refers to an Annual Tax on Enveloped Dwellings.

Last Updated: February 2023

What is it?

ATED is a tax due on a company, partnership or non-natural person that holds an interest in a UK dwelling that is valued at more than £500,000.

When is it due?

ATED is a self-assessed tax. This means that taxpayers who are liable to pay an ATED charge must submit ATED returns, even nil returns, and make any outstanding payment within HMRC’s payment deadline.

As opposed to most other taxes, ATED returns need to be submitted at the beginning of each annual period and not following the end of the period. ATED returns need to be submitted online to HMRC between 1 April and 30 April in any chargeable period.

ATED returns cannot be submitted before the start of the period (i.e. before 1 April).

Companies can use the ATED online service and appoint an agent to submit the return on their behalf.

What is a dwelling?

A property is a dwelling if all or part of it is used, or can be used, as a residence. For example, a house or flat is classed as a dwelling.

Some properties are not classed as dwellings, thus are not liable to pay any ATED charges. These include:

• Hotels
• Guest houses
• Boarding school accommodation
• Hospitals
• Student halls of residence
• Military accommodation
• Care homes
• Prisons

How to value property

You can either value the properties yourself, or a professional valuer can be brought in to value the property in question. The valuation of the property must be taken in sterling.

There are fixed revaluation dates for all properties; every 5 years after 1 April 2012, for example, at 1 April 2017, 1 April 2022, and so on, irrespective of the date the property was acquired. This means that from 1 April 2022, a new and updated property valuation figure must be used until 1 April 2027.

The revaluation would be used to prepare the following year’s ATED return. For example, the 1 April 2022 valuation would be used for 2023/24 ATED return.

What you need to pay

The amount you must pay is calculated using a banding system dependent on the value of the property.

Chargeable amounts for 1 April 2025 to 31 March 2026 are as follows:

*Please note that a revaluation as of 1 April 2022 is now required, which will form the basis for the ATED charge for 2023/24 for properties held on 1 April 2022. The revaluation is likely to bring many properties over the £500k threshold and into ATED for the first time in 2023/24.

If the property is held on the first day of the chargeable period (i.e. 1 April), the full annual charge as shown in the table above is due. If, however, the property is acquired during a chargeable period, a proportion of the ATED charge is payable in that period.

The annual charges increase yearly in line with inflation.

Reliefs and exemptions available

In some cases, reliefs are available to companies that own dwellings, which in turn reduces the ATED charge payable to nil. These include properties that are:

• let to a third party on a commercial basis and aren’t, at any point, occupied (or accessible for occupation) by anybody connected to the owner;
• open to the public for at least 28 days in 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.

Penalties

Penalties and interest could be charged if you do not file your return or make your payment on time. Penalties could also be charged if an inaccurate return is submitted.

Follow up steps

If ATED charges apply to your property interests, our tax advisers are well-equipped to assist you with any queries you may have. Contact us and we will be happy to assist with your enquiry.