Annual Tax on Enveloped Dwellings (ATED): Everything you need to know
Annual Tax on Enveloped Dwellings (ATED): Everything you need to know
What is ATED?
The Annual Tax on Enveloped Dwellings (ATED) is an annual tax charged on UK residential properties valued at over £500,000 that are held by ‘non-natural persons’, like companies, partnerships with a corporate member, and collective investment schemes.
Who does ATED apply to?
ATED applies if the UK property is a dwelling - meaning it is used for, or could be used as a residence, including its gardens and grounds. Certain types of properties are excluded, like hotels, hospitals, care homes, student halls of residence, military accommodation and prisons.
If these residential properties are owned by certain entities, ATED will apply. Relevant entities that may fall within ATED include:
- UK and non-UK companies
- Partnerships with at least one corporate member
- Collective investment schemes such as unit trusts or OEICs
Filing and Payment Deadlines
ATED is a forward-looking tax: returns are filed and tax is paid in advance for the chargeable period 1 April–31 March.
Annual returns must be filed on or after 1 April, and no later than 30 April preceding the chargeable period.
If a property is acquired during the year, the ATED return must be submitted within 30 days of acquisition, and the tax is prorated accordingly.
Valuation Requirements
Properties must be valued for ATED using fixed five-year revaluation dates
If the property was owned on or before 1 April 2022, the property valuation is taken at 1 April 2022, applying to the chargeable periods 2023–24 through to 2027–28.
If the property was acquired after 1 April 2022, the acquisition date is used as the valuation basis.
The property will need to be revalued if:
- Substantial acquisitions or disposals of ≥£40,000 occur, or
- Significant refurbishments or redevelopments materially change the property’s value.
How much is the ATED charge?
ATED charges scale with the value of the property. HMRC’s published ATED rates for the year 1 April 2025 to 31 March 2026 are:
| Property Value | Annual ATED Charge |
| £500,001 - £1m | £4,450 |
| £1m - £2m | £9,150 |
| £2m - £5m | £31,050 |
| £5m - £10m | £72,700 |
| £10m - £20m | £145,950 |
| Over £20m | £292,350 |
Reliefs and exemptions for property rental businesses, property development trades, charitable use and others can reduce the charge to nil but must be claimed annually.
Companies House Registration Requirements
Overseas entities holding UK land (including residential property) must register with Companies House’s Register of Overseas Entities. This means that overseas entities must provide information about their beneficial owners and maintain annual updates. HMRC sources confirm this requirement applies where an overseas entity owns UK residential property.
How do ATED penalties work?
Failing to submit a return by the filing date results in a fixed penalty of £100. A further penalty of £10 per day is due for every day that the return is not submitted, up to 90 days after the deadline. If you still haven’t filed after six months, then the penalty is the higher of 5% of any tax due, or £300.
The penalties for filing a Nil liability ATED Return or Relief Declaration Return more than six months late therefore total £1,300.
If you can demonstrate a reasonable excuse for the failure, you may avoid a penalty. However, the First-tier Tax Tribunal has rejected ignorance of the law as a reasonable excuse, and rejected the defence of proportionality in relation to fixed penalties, for Nil ATED returns.
How we can help
If your property has been brought over the £500k threshold for the first time, it may be worth considering “de-enveloping” the property from existing structures. If you are considering de-enveloping, our team of tax specialists can help to address the potential taxes that could arise - mainly Stamp Duty Land Tax and Capital Gains Tax issues.
Please contact Alex Fish or Andrew Crossman if you’d like to discuss your situation.