The Annual Tax on Enveloped Dwellings (ATED) is a UK tax applied to residential properties worth over £500,000 that are owned by companies, partnerships with corporate partners, or collective investment schemes. This tax aims to prevent the use of corporate structures to avoid certain taxes on high value residential properties. If your company owns such property, understanding ATED rules is important to staying compliant and avoiding penalties. In this article, we explain who must file, when to file, how the tax is calculated, and what reliefs and exemptions might be available.
Who Needs to Comply with the Annual Tax on Enveloped Dwellings (ATED)?
You need to follow ATED rules if your company or partnership owns a UK residential property worth more than £500,000. ATED applies only to “non-natural persons” which means:
- Companies (UK and overseas)
- Corporate partnerships
- Certain investment funds and trusts
It does not apply to individuals who own properties in their personal names. The tax is only applicable to properties that are classified as dwellings. This includes properties that are suitable for use as a residence. Properties used commercially like hotels, boarding houses, or student halls of residence, do not fall under ATED.
Even if no tax is due, you may still need to submit a return to claim relief or confirm exemption. You are exempt from both tax and return if the property is owned by:
- A charity using the property for charitable purposes
- A public body (e.g., local authority, NHS trust)
- A sovereign or institution established for national purposes.
ATED Filing Requirements and Key Deadlines
The ATED tax year runs from 1 April to 31 March. If you own a property on 1 April, your ATED return must be filed by 30 April, along with any tax due. For properties acquired during the tax year, the return is due within 30 days of acquisition. However, for newly built dwellings or those converted from non-residential properties, the return is due within 90 days of the property becoming a dwelling. Missing these deadlines will result in penalties and interest, even if you claim relief.
Understanding ATED Valuation and Property Thresholds
The property must be valued at its market price to determine if ATED applies and calculate the amount owed. This valuation is required every five years. The latest valuation date was 1 April 2022 and will apply for chargeable periods from 1 April 2023 to 31 March 2028. If the property was acquired after this date, the valuation should reflect the purchase price
Annual Tax on Enveloped Dwellings (ATED) Charges for 2025/26
Based on the property’s value, the ATED charge is calculated as follows:
| Property Value Band | Annual Charge |
| £500,001 – £1 million | £4,450 |
| £1 million – £2 million | £9,150 |
| £2 million – £5 million | £31,050 |
| £5 million – £10 million | £72,700 |
| £10 million – £20 million | £145,950 |
| Over £20 million | £292,350 |
Available Reliefs Under ATED: Tax Savings for Property Owners
You don’t always have to pay ATED. HMRC allows reliefs for certain property uses. But you must claim the relief through a proper return each year.Here are some common ATED reliefs:
- Commercial letting: If the property is rented to unrelated tenants on a commercial basis
- Property development: If the property is being built or redeveloped for resale
- Trading stock: If you’re a property trader holding the property for sale
- Employee use: If your company uses the property to house employees (not directors or family members)
- Charitable use: If a charity owns and uses the property for its work
- Farmhouses: If occupied by a working farmer as part of a functioning farm
These reliefs aim to exclude genuine commercial property use from ATED, but HMRC requires strict documentation to support claims. A single Relief Declaration Return can cover multiple properties if the same relief type applies to all of them.
Penalties for Non-Compliance with ATED
If you fail to submit your ATED return or pay your tax on time, HMRC will charge penalties. These include:
- Late filing penalties: A fixed penalty starts at £100, with more added after 3, 6, and 12 months
- Late payment penalties: Interest starts the day after the due date, with percentage-based charges
- Incorrect returns: If you submit incorrect details and it leads to underpaid tax, HMRC may charge extra penalties depending on whether the mistake was careless or deliberate
To avoid these issues, companies should keep proper records, file on time, and ensure valuations and use of properties are accurate and well-documented.
Final Thoughts: Ensuring Compliance with ATED
If your business owns residential property in the UK through a company and it’s worth over £500,000, you must pay the Annual Tax on Enveloped Dwellings (ATED). To stay compliant, know who needs to file, when to file, and how much to pay. Remember to file by 30 April each year, even if no tax is due, to avoid penalties. Property investors and developers should regularly check property use and value. If you’re unsure, talk to a tax advisor or visit HMRC’s ATED guidance online.
