The Annual Tax on Enveloped Dwellings (ATED) was introduced to combat tax avoidance, particularly by individuals using companies to acquire and hold high-value residential properties in the UK. These properties are referred to as “enveloped” because the ownership is placed within a corporate entity or “envelope.”

What is ATED?

ATED is a tax payable on high-value residential properties situated in the UK that are held within such corporate envelopes. The tax is due for each ATED period, which runs from 1 April to 31 March.

ATED Calculation

The amount of ATED due is based on the value of the property, with different charges applied according to specific property value bands. For the period 1 April 2025 to 31 March 2026, the following charges apply:

• Properties valued £500,000 or less are exempt from ATED (no charge).
• Properties valued £500,000 up to £1 million are charged £4,450.
• Properties valued £1 million up to £2 million are charged £9,150.
• Properties valued £2 million up to £5 million are charged £31,050.
• Properties valued £5 million up to £10 million are charged £72,700.
• Properties valued £10 million up to £20 million are charged £145,950.
• Properties valued over £20 million are charged £282,350.

If the company only owns the dwelling for part of the year, or if the property is only used as a dwelling for part of the year, ATED is calculated proportionally, based on the number of days during which the property is subject to the ATED regime.

Filing the ATED Return

A completed ATED tax return must be submitted for each dwelling that is subject to ATED. The return should be filed during the ATED period it relates to. For example, if a company purchases a dwelling for £3 million on 1 July 2024, the return for the 1 April 2024 to 31 March 2025 ATED period is due.

The ATED return and payment must be submitted by 30 April in the ATED period. For example, for the ATED period ending on 31 March 2025, both the return and payment are due by 30 April 2024.

However, in the year of acquisition, the purchasing company has 30 days from the acquisition date to submit the return and pay the ATED charge. If the dwelling is newly built, this period extends to 90 days.

Relief from ATED

There are several scenarios in which a company may be eligible for relief from ATED, reducing or eliminating the ATED charge. To claim relief, companies must submit a claim on their ATED return. Relief may apply in the following cases:

• The dwelling is let to a third party.
• The dwelling is part of a property trading or property development business.
• The dwelling is owned by a housing co-operative with no transferable share capital.
• The dwelling is held for charitable purposes or is open to the public for at least 28 days per year.
• The dwelling is used by an employee of the company, provided the employee holds no more than 10% of the company’s shares.
• The dwelling is a farmhouse occupied by a farm worker.

Speak to an Expert

If your company owns or is planning to acquire a residential property valued at more than £500,000, and you are unsure whether it will be liable for ATED, please get in touch with our team. We’ll be happy to assist you in navigating ATED and ensuring compliance.