Annual Tax on Enveloped Dwellings
What is Annual Tax on Enveloped Dwellings (ATED) and who does it apply to?
ATED applies to residential property owned by non-natural persons, including companies, a partnership with a corporate member or collective investment schemes (including unit trusts). The charge currently applies for properties worth £500,000 or more.
Those within the ATED rules are subject to an annual property tax based on the value of the property held.
How is ATED calculated?
Those within the ATED rules are subject to an annual property tax based on the value of the property held. Revaluations occur every five years.
The ATED year runs from 1 April to 31 March. The charge for the year until 31 March 2026 is based on the value of the property on 1 April 2022 (or on acquisition if later).
Chargeable amounts for 1 April 2025 to 31 March 2026 are as follows:
| Property value | Annual charge |
| More than £500,000 up to £1 million | £4,450 |
| More than £1 million up to £2 million | £9,150 |
| More than £2 million up to £5 million | £31,050 |
| More than £5 million up to £10 million | £72,700 |
| More than £10 million up to £20 million | £145,950 |
| More than £20 million | £292,350 |
When must ATED returns be filed and tax paid?
The ATED year runs from 1 April to 31 March. Chargeable and relief returns must be filed a year in advance, with the filing and payment deadline being 30 April. The ATED return can only be filed online from 1 April 2025, leaving a tight window. Where a dwelling is acquired during a chargeable period, the filing and payment deadline will be 30 days following the date of acquisition.
As the return is due towards the beginning of the chargeable period, this may mean that an amendment needs to be made at a later date if, for example, a property is sold, or if a property becomes eligible for or ceases to be eligible for relief.
A penalty regime exists for the late filing of ATED returns, including for Relief Declaration Returns. These can mount up on an annual basis if not addressed, so it is vital returns are submitted where required, even if there is no ATED charge due.
Valuation date and pre-banding check
For 2025/26 (and the following two years), the ATED charge is based on the value of the property on 1 April 2022 (or on acquisition if later).
Ideally, for residential properties owned before 1 April 2022, revaluations should have been carried out as close to this date as possible. The valuation must be based on the open market value of the property. Although a formal valuation is not strictly required, it is advisable to use a property professional to ensure that the figure is robust and reasonable. HMRC guidance also confirms that the valuation must be a specific amount rather than a ‘within a range of’ type valuation.
HMRC offers a pre-return banding check service to taxpayers. This can be applied for via an online form when taxpayers believe that the relevant property value is within 10% of a banding threshold. HMRC will typically reply within a 30-day period confirming whether they agree with the valuation. It is therefore advisable to submit the pre-return banding check as early as possible.
One to Many campaign
It should be noted that there is increased scrutiny from HMRC on ATED returns, and as part of this stricter approach, HMRC has recently started to issue letters to companies under a 'One to Many campaign'. For example, for companies claiming rental relief exemption, the letter requests companies to provide evidence that they are a qualifying property rental business; renting to a third party tenant is not necessarily sufficient, as HMRC is now delving more deeply into whether the company may not be run on a ‘commercial basis’ and ‘with a view to profit’, especially if some losses have been made historically.
How can Crowe support you?
Crowe’s Private Client Tax team offers both compliance and advisory services to assist clients in navigating ATED matters.
ATED compliance services broadly cover:
- preparation and submission of ATED returns, ensuring compliance with all filing requirements
- liaising with HMRC on your behalf on all ATED related matters.
ATED advisory services broadly cover:
- determining eligibility for reliefs
- guidance on how and when ATED may apply, including upon acquisitions and
- disposals of properties
- voluntary disclosures to HMRC on cases where ATED has not been previously
- considered or dealing with HMRC investigations into the ATED position.
- mixed use of properties.
If you have any queries or require assistance with your ATED filings, please speak to your usual Crowe Tax Advisor.
