The UK’s Enveloped Dwelling Tax (ATED) applies to residential properties held in certain structures, typically by companies, partnerships, or collective investment schemes. It’s crucial for property owners in these categories to be aware of their obligations to declare the property’s value and pay the tax if applicable. Here’s what you need to know to ensure you stay compliant and avoid
How Do I Know if I Need to Declare ATED?
You must Declare Enveloped Dwelling Tax if your property is owned by an in-scope entity (e.g., a company or partnership) and the value of the property exceeds £500,000. If your property is valued at or above this threshold, you’ll need to determine the applicable rate of ATED and file the return with HMRC.
Key Criteria for ATED Eligibility
Here are the main conditions that determine whether you need to declare ATED for a residential property:
- Ownership Type: The property must be owned by a company, partnership, or collective investment scheme. If the property is owned by an individual or a trust, ATED does not apply.
- Property Value: The property must have a value of more than £500,000. It is essential that you have an up-to-date valuation to ensure compliance, as the value must be re-assessed at least every five years. For the 2025/26 chargeable period, the property valuation must reflect the value as of April 1, 2022.
- Property Use: The property must be a residential dwelling. Properties used for commercial purposes or as holiday lets may be excluded from ATED requirements.
Key Dates and Deadlines
The 2025/26 tax period is approaching, and you will need to be aware of the critical dates for your ATED return. The valuation date for properties owned by a company must be as of April 1, 2022. Your ATED return for the 2025/26 tax year is due by April 30, 2025.
Failure to Declare Enveloped Dwelling Tax by this deadline can result in significant penalties. If the return is filed late, HMRC will charge an initial penalty of £100. Additionally, interest may be charged on any late payments.
ATED Tax Rates for 2025/26
The ATED tax rates for the 2025/26 chargeable period are as follows:
- £500,001 to £1 million: £4,450
- £1 million to £2 million: £8,900
- £2 million to £5 million: £22,250
- £5 million to £10 million: £54,550
- £10 million to £20 million: £109,100
- Over £20 million: £218,200
These rates represent the annual charge for holding a property within these value bands, and they increase progressively as the property’s value rises.
How to Submit Your ATED Return
To submit your ATED return, you’ll need to register for ATED with HMRC and file the return online through the government’s online services portal. This process is streamlined through the government’s digital services, making it easier for property owners and their agents to complete and submit the necessary forms.
You must also pay the tax associated with the property within the same timeframe to avoid penalties. It’s advisable to use a trusted accountant or tax advisor familiar with ATED to ensure all aspects of the return are accurate.
Conclusion
If you own residential property in the UK through a company or other corporate entity and the value exceeds £500,000, you must submit ATED return and pay the associated tax. For the 2025/26 chargeable period, ensure that your property’s valuation is updated and the return is submitted on time to avoid penalties. By staying on top of the rules and seeking expert advice when needed, you can ensure that your property remains compliant with UK tax law.
If you have any doubts about your specific situation or need assistance in calculating the ATED liability, consider seeking professional help to avoid unnecessary penalties.
