Annual Tax on Enveloped Dwellings (ATED)

What is ATED?

ATED (Annual Tax on Enveloped Dwellings) is a tax levied each year on non-natural persons (e.g., a company) that own a UK residential property (i.e. a dwelling) and the value of the individual property is worth £500,000 or more.

The amount of tax due depends on the value of the individual residential property. For instance, dwellings worth between £500,000 – £1m will pay an ATED charge of £4,450. The charge increases to £9,150 if the property value is between £1m-£2m.

If the property is used for a qualifying purpose, then no ATED charge may be due. Some of the qualifying purposes include; properties let out commercially to a third party throughout the year, property owned by a property developer as stock, and properties being used by a trading business to provide accommodation to certain qualifying staff members.

If the property is used for a qualifying purpose, an ATED report will still be due with HMRC, even though no tax is due.

How to report ATED

If a non-natural person owns a residential dwelling worth over £500,000 then an annual ATED return will need to be submitted to HMRC on or after 1 April for the year ahead and the filing deadline is 30 April. This return is filed in advance for the next chargeable period i.e. returns that cover the period 1 April 2025 – 31 March 2026 must be filed by 30 April 2025.

Any Annual Tax on Enveloped Dwellings charge due to HMRC needs to be paid by 30 April.

An organisation may submit this return themselves or request an agent to do it on their behalf.

HMRC’s Campaign

HMRC have began contacting organisations that need to settle outstanding ATED liabilities. In particular HMRC, are contacting these organisations who have claimed an ATED relief they maybe were not entitled to.

HMRC are also contacting off-shore companies that own UK residential dwellings worth over £500,000 that have reported consecutive losses on their tax returns. This is because HMRC may question Annual Tax on Enveloped Dwellings reliefs should not be available if the property business is not being run on a commercial basis.

If you have received such a letter from HMRC and wish to know the next steps to take we can help with this process.

If you have any questions concerning the above, please feel free to get in touch with Joe Wilson on 023 8046 1237 or email Joe Wilson.