Annual Tax on Enveloped Dwellings (ATED) was introduced ten years ago. An Enveloped Dwelling is a UK residential property owned partly or wholly by a company, partnership or collective investment scheme such as a Unit Trust. At first the tax only applied to property valued over £2m but the threshold was lowered in 2016 to include properties with a value of £500,000 or more.
What is a dwelling?
A dwelling is deemed to be a property of mixed use or part of a residential property including surrounding gardens, grounds and outbuildings. If the property has partial residential use, the ATED only applies to the value of that part of the property. Each self-contained flat within a property is considered a separate dwelling for ATED purposes.
Properties such as hotels, guest houses, boarding schools, student halls of residence, care homes, hospitals and prisons are not classified as dwellings.
How much tax is due?
An ATED return for each dwelling must be completed and submitted to HMRC between 1 and 30 April or within 30 days of the purchase of a property that is subject to ATED. The tax payment is also due by 30 April. The amount of tax due increases annually in line with the Consumer Price Index, with the amounts for the 2023-24 tax year being:
| Value of Property | ATED due |
| £500K – £1m | £4,150 |
| £1m – £2m | £8,450 |
| £2m – £5m | £28,650 |
| £5m – 10m | £67,050 |
| £10 – £20m | £134,550 |
| More than £20m | £269,450 |
What valuation is used?
An open market valuation of the property can be carried out by the company or by a professional valuer. The property must be revalued every five years and this valuation is used for the five chargeable periods from the following April submission.
Is there Relief on ATED?
There are some relief circumstances which need to be completed on a Relief Declaration Return and submitted to HMRC by the due date. Relief applies, for example, if the property:
- is let to a third party on a commercial basis and isn’t occupied by anyone connected with the owner
- is open to the public for at least 28 days a year
- is being developed for resale by a developer
- is owned by a property trader for the sole purpose of resale
- is repossessed by a financial institution as the result of a loan
- is acquired under a regulated Home Reversion Plan
- is being used to provide accommodation to certain qualifying employees
- is a farmhouse occupied by a farm worker or former long-serving farm worker
- is owned by a registered social housing provider
Are penalties charged on ATED?
Late or inaccurate submissions and payments can incur a penalty and interest.
To iron out all your ATED and other property tax queries, speak to the friendly, approachable experts at CRM on 01865 379272.
