When you run a business, it’s your responsibility to keep abreast of evolving regulations. Staying up to date with all the tax liabilities and reporting obligations that affect your operations is not always easy, but if you don’t, there are likely to be financial consequences.
One example of a tax we see catching out business owners is the Annual Tax on Enveloped Dwellings (ATED for short). ATED impacts any business that owns residential property in the UK with a value of £500k or more. Our work advising and supporting businesses shows that some owners are confused about their ATED responsibilities – and it’s quite likely that there are others who are unaware of them altogether.
In this blog, we’re going to explain what ATED is and how it works so you can decide whether it applies to you – and be confident in navigating it if it does.
What is ATED?
ATED is a tax levied on companies, partnerships with corporate members, and collective investment schemes that own UK residential properties valued above a set threshold – currently £500k.
Introduced in 2013, ATED was designed to discourage the use of corporate structures to avoid other property-related taxes, such as Stamp Duty Land Tax and Capital Gains Tax.
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How ATED works
- Who has to complete an ATED return?
If your business owns a residential property in the UK, you must complete an ATED return if:
- The property is valued at £500k or more, and;
- The property meets with the definition of ‘a dwelling’, i.e. all or part of it is used, or could be used, as a residence, for example, a house or flat. It includes any gardens, grounds and buildings within them.
- Exemptions from ATED
A residential property owned by your business is exempt from paying ATED if:
- It falls below the valuation threshold, or;
- It is genuinely part of your business operations – for example, you let it out and declare the rental income you receive.
Impportant note: Even if your property is exempt, you must still file a return each year.
- How much do you have to pay?
How much ATED you have to pay each year will depend on the value of your property for the applicable chargeable period.
There are fixed revaluation dates every 5 years: these apply regardless of when the property was acquired. The most recent revaluation date was 1st April 2022, and this applies to the chargeable periods: 2023-2024; 2024-2025; 2025-2026; 2026-2027 and 2027-2028.
ATED charges for the valuation period 1 April 2023 to 31 March 2024
| Property value | Annual charge |
| More than £500k | £4,150 |
| More than £1m | £8,450 |
| More than £2m | £28,650 |
| More than £5m | £66,050 |
| More than £10m | £134,550 |
| More than £20m | £269,450 |
- Getting your property valued
You will need to obtain an initial valuation based on the date you acquired the property. Your valuation should be conducted by a professional and must be on an ‘open-market willing buyer, willing seller’ basis.
- Filing your return
ATED returns must be submitted annually. You can register for HMRCs Annual Tax on Enveloped Dwellings service and submit your return online. HMRC will calculate what you owe based on what you report.
If the property is within the scope of ATED on 1st April, the return must be filed by 30th April in the year of charge. If the property comes within the scope of ATED from 1st April – for example by acquisition or change of use, the return must be filed within 30 days of acquisition or transaction.
Submitting an inaccurate return, failing to file a return on time, or failing to pay ATED charges on time may result in penalties and fines.
While ATED may seem complex, it’s a tax you should not ignore if your business owns residential property. Because ATED is a self-assessed tax, you’re responsible for calculating and paying the tax due. Failure to meet the ATED deadlines or underreporting your property’s value can result in penalties and interest charges, so it’s crucial to stay on top of your obligations.
Let Inca Help You Stay Informed & Compliant
Ensuring you stay fully aware of all the tax regulations affecting your business can be very time-consuming. If you choose to work with a professional accounting partner like Inca, it’s not something you have to worry about. Our clients know that – while they get on and run their businesses, we’ll keep them informed of any tax regulations like ATED they need to be aware of, making sure that they always stay compliant as well as tax-efficient.
If you have questions about ATED, or would like to know more about how Inca can support your business, call us today for an initial chat on 01235 868888 or email us at [email protected].
