“Should I transfer my residential properties into a limited company?” – it’s a common question we are asked in the tax world. Whilst there are many tax implications to consider, including capital gains tax and stamp duty land tax, the tax often forgotten about is Annual Tax on Enveloped Dwellings (ATED).
Whilst ATED is not payable by all corporate entities, there is still an obligation to register and file on annual basis if conditions are met. The penalty regime mirrors that of self-assessment, which can be costly if not adhered to.
What is ATED and when is it applicable?
The Annual Tax on Enveloped Dwellings (ATED) is an annual charge on UK dwellings held by a Non-Natural Person (NNP).
The regime was introduced on 1 April 2013 and applies where a dwelling is worth more than £500,000; the term dwelling covers most residential properties and a “non-natural person” broadly means a company, but also covers partnerships with corporate members and collective investment schemes.
Some establishments and properties are specifically exempt from ATED, and examples include commercial property, boarding school accommodation, student halls of residence, care homes, hospitals, and hotels.
The ATED charge applies to properties unless the company is eligible to claim a relief. The various reliefs are discussed further below.
ATED returns
All NNPs with residential property in excess of £500,000 will need to file a return whether the charge is applicable or not. If a relief can be claimed, a relief declaration return will need to be filed on an annual basis. This relief return will cover all properties held by the company provided the same relief applies.
If no relief applies, a separate charge return is required per property.
The ATED year runs from 1 April to 31 March and unlike most UK taxes, returns are filed, and any tax is payable at the start of the period, rather than retrospectively. Therefore, in April 2025, the return for the period 1 April 2025 to 31 March 2026 is due to be filed.
The filing deadline is 30 April at the beginning of each return period, unless a property is acquired or developed in the year, in which case the deadline moves to 30 days from completion (rather than exchange) or 90 days from the day in which the dwelling is deemed to come into existence for Council Tax purposes.
Returns can be filed online from 1 April, giving a 30-day filing window.
How do I know if I have to file a return?
A company falls within the ATED regime if a residential dwelling has a taxable value in excess of:
£500,000 | From 1 April 2016 onwards |
£1 million | From 1 April 2015 |
£2 million | From 1 April 2014 |
If a property is only partly used as a dwelling (e.g. a flat with a shop below), it is only the value of the residential part which is used to determine whether ATED applies.
The property is valued at the later of its acquisition date or at the five-yearly valuation review date. There are fixed revaluation dates for all properties, which fall every 5 years commencing on 1 April 2012 as follows:
Revaluation date | Chargeable periods that apply (1 April to 31 March) |
1 April 2021 | 2013 to 2014 2014 to 2015 2015 to 2016 2016 to 2017 2017 to 2018 |
1 April 2017 | 2018 to 2019 2019 to 2020 2020 to 2021 2021 to 2022 2022 to 2023 |
1 April 2022 | 2023 to 2024 2024 to 2025 2025 to 2026 2026 to 2027 2027 to 2028 |
Outside of the 5 yearly valuation review, a revaluation is only required if there is either a substantial acquisition or substantial disposal – broadly a transaction relating to an interest in that property worth more than £40,000.
What is payable?
The amount you’ll need to pay is worked out using a banding system and is based on the value of the property.
The ATED due for each band increases in line with inflation each year. For the 1 April 2025 to 31 March 2026 chargeable period, the smallest band (for properties valued between £500,001 to £1 million) has an annual charge of £4,450 and the top range is £292,350 for properties valued over £20 million.
If a property is acquired during the year or qualifies for a relief for part of the year, the ATED charge is apportioned based on the number of days the property is owned in the year.
Reliefs available under ATED
In some circumstances, it may be possible for NNP’s to either claim relief or exemption from the ATED charge. The main reliefs and exemptions are:
Note, the relief is not automatic and must be claimed via an ATED Return. If multiple properties are held that are eligible for relief, it is possible to submit a single relief declaration return for all properties where the same type of relief applies.
Fines & penalties for late-filing or late payment
The ATED penalties mirror that of self-assessment and are summarised below:
Late filing | Late payment | Penalty |
Miss filing deadline (30 April) |
| £100 |
| 30 days late | 5% of tax due |
3 months late |
| Daily penalty £10 per day for up to 90 days (max £900) |
6 months late |
| 5% of gross tax liability or £300, if greater |
| 6 months late | 5% of tax outstanding at that date |
12 months late |
| 5% of gross tax liability or £300 if greater |
| 12 months late | 5% of tax outstanding at that date |
Further penalties can be levied if information was deliberately withheld and or concealed from HMRC.
How can we help
If you're unsure whether ATED applies to your property portfolio, or need support with your filings, our tax team can guide you through the process, ensure compliance, and help you claim any available reliefs. For a confidential discussion, please get in touch with Partner, David Portman (davidportman@lubbockfine.co.uk)
