If your UK property portfolio is held through a company or similar structure, there’s an important annual deadline you can’t afford to overlook called the Annual Tax on Enveloped Dwellings (ATED). Missing it can result in penalties and potentially prompt the taxman to have a closer look at your wider tax affairs.
When the government introduced ATED back in 2013, the goal was to discourage high-net-worth individuals from putting expensive residential property into corporate structures to reduce liabilities like Stamp Duty Land Tax (SDTL) and other related taxes.
With government changes and value bands lowered, the scope of ATED has quietly expanded over the years. What started out as a niche tax aimed at a small number of property owners now impacts many legitimate businesses, including landlords and developers holding property for genuine commercial purposes.
If your company owns high-value UK residential property, it’s important to understand the Annual Tax on Enveloped Dwellings if you want to stay on the right side of HMRC. In this article, we’ll walk you through what ATED is, who it applies to, and the key deadlines you need to keep on top of.
What is the Annual Tax on Enveloped Dwellings (ATED)?
The Annual Tax on Enveloped Dwellings is a yearly tax that applies to certain corporate bodies that own UK residential properties.
The term 'enveloped' refers to the ownership structure, specifically, when a residential property is held within a corporate entity, in most cases a limited company. The company acts as a wrapper or 'envelope' around the asset.
Who is Affected by the Annual Tax on Enveloped Dwellings?
ATED is not a tax on individuals holding property in their own name, it targets certain corporate and investment structures that own UK residential property.
To be ‘in scope’ of ATED, three main conditions must all be met:
1. Ownership Condition: The property must be owned, wholly or partly, by a ‘non-natural person’. In practice, this usually means:- A Company: This is the most common scenario. It doesn’t matter whether the company is based in the UK or overseas: if it owns a UK residential property, ATED needs to be considered.
- A Partnership with a Corporate Partner: If your partnership includes one or more corporate partners (for example, a limited company), the partnership will fall within the scope of ATED.
- A Collective Investment Scheme: This covers certain investment vehicles such as open-ended investment companies.
2. Property Type: The property must be a UK residential dwelling. This includes houses, flats, or any building (or part of a building) that is used, or could reasonably be used, as a home.
3. Value Threshold: The property must be valued at more than £500,000.
Properties Excluded from ATED
It’s also worth knowing that some of the most common ways people own property fall outside the scope of ATED. For example:
- Individuals: If you own a residential property in your own name (rather than through a company), ATED doesn’t apply.
- Trusts: Trusts have their own set of tax rules, but the ATED charge itself does not apply where a residential property is held by a trust.
What is a 'Dwelling' for ATED Purposes?
Not every residential property is a 'dwelling'. For ATED purposes, a 'dwelling' refers to a property that is used, or suitable for use, as a single residence. This definition is quite broad and includes the main building itself, along with any attached gardens and grounds.
The government recognises that some buildings, while residential in nature, serve a commercial or public function. These are generally excluded from the ATED charge and include:
- Hotels and guests houses
- Student accommodation
- Hospital and care homes
- Military accommodation
- Prisons
If your corporate-owned property falls outside the list of exclusions and is suitable for residential use, it's considered an ATED 'dwelling', and your company will then need to meet the necessary compliance obligations.
Valuations: How is the ATED Charge Calculated?
The amount of Annual Tax on Enveloped Dwellings your company pays depends on two things: what the property is worth and which ATED tax band it falls into.
Working Out Your Property’s Value
ATED Return Charge Bands
| Property Value | 2025-2026 Annual Charge | 2026-2027 Annual Charge |
| £500,000 + up to £1 million | £4,450 | £4,600 |
| £1 million up to £2 million | £9,150 | £9,450 |
| £2 million up to £5 million | £31,050 | £32,200 |
| £5 million up to £10 million | £72,700 | £75,450 |
| £10 million up to £20 million | £145,950 | £151,450 |
| £20 million + | £292,350 | £303,450 |
Rates are updated annually by HMRC.
Although ATED works on a standard five-year valuation cycle, certain events can trigger an earlier revaluation of the property. This can happen if your company sells a substantial part of the dwelling or its grounds for more than £40,000. In that case, the sale will trigger a new valuation date for what remains of the property.
It can also happen if your company makes a significant new acquisition connected to the existing ATED property. For instance, this might be additional land or an extension worth more than £40,000. In that situation, a new valuation date is triggered for the whole property.
Key ATED Filing Dates and Deadlines
The Annual Tax on Enveloped Dwellings is a forward-thinking tax. Unlike many other taxes, ATED is paid in advance for the year ahead (1 April - 31 March). There are three main deadlines you need to be aware of, timing depends on when the property came into company ownership:
| Property Acquisition Date | Filing Deadline |
| Existing properties (owned on 1 April) | 30 April (This is your fixed annual date) |
| Newly acquired properties | Within 30 days of the purchase |
| Newly built properties | Within 90 days of completion/occupation |
ATED Filing Penalties and HMRC Compliance
If you miss the 30 April filing deadline, even by a single day, HMRC will automatically issue a £100 penalty. After that, daily charges start to rack up, and this happens even if no tax is actually due and you’re just claiming a relief. The longer the return is outstanding, the higher the penalties, reaching up to £1,600 per property for late filing.
HMRC is notoriously unforgiving when it comes to ATED fines, so getting a fine overturned is uncommon. Unlike some other areas of tax where “no tax lost” might lead to a more relaxed approach, the courts have repeatedly confirmed that these penalties still stand, even where the property qualifies for 100% relief.
Annual Tax on Enveloped Dwellings Relief and Exemptions
Claiming relief is arguably one of the most important things most property businesses can do. While ATED applies to many corporate entities, there are a number of reliefs and exemptions that can significantly reduce, or even remove, the tax you pay – depending on how the property is used.
These reliefs are particularly important for businesses in the property, development, or rental sectors, as well as for certain more complex ownership arrangements. Knowing which reliefs or exemptions you might qualify for is key to managing your overall ATED exposure and staying fully compliant with HMRC’s rules.
You may be able to claim ATED relief if your property meets HMRC’s specified criteria. If you claim a relief, you must still file a return (a Relief Declaration Return) by the 30th April deadline.
A small number of organisations are fully exempt from ATED and do not need to file a return, provided they meet all the conditions. This usually applies to:
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Charitable companies
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Public bodies
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Entities established for national purposes
Managing ATED Compliance and Property Tax Strategy
ATED compliance is a technical and specialist area of UK property tax. Getting the valuation wrong, failing to claim a legitimate relief, or, most commonly, missing the 30 April deadline can be costly.
If your company, or a partnership you are involved in, owns a UK residential property over the £500,000 threshold, our tax team can provide the guidance you need.
We can help you:
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Determine if your property falls within the ATED regime
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Calculate the appropriate market value for compliance
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Prepare and file your ATED returns (including, Relief Declaration Returns) to ensure compliance and avoid penalties
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Integrate your ATED property compliance with your overall corporate tax planning
