There are many areas of tax that can catch you out when you own a property. One of those is the annual tax on enveloped dwellings (ATED).
There’s a lot to ATED, it is a relatively unique tax, from registering a dwelling to understanding the taxable value and giving the right information at the right time. Therefore, it’s essential to understand exactly what ATED means for you.
In this blog post we cover just that so you can manage your property with calm and confidence.
What is the ATED?
The ATED is an annual tax, mainly paid by companies that own UK residential property worth over £500,000.
There are a number of conditions that determine whether you need to complete an ATED return. First, you’ll have to file a return if your property is a ‘dwelling’ and resides in the UK.
A ‘dwelling’ is a property that is completely or partly used as a residence, such as a house or flat. It includes any gardens, grounds and buildings within them.
However, certain types of living accommodation are excluded from the definition of ‘dwelling’. These include:
- guest houses
- boarding school accommodation
- student halls of residence
- military accommodation
- care homes
Second, you’ll need to complete an ATED return if your property was valued at more than:
- £2 million (for returns from 2013 to 2014 onwards)
- £1 million (for returns from 2015 to 2016 onwards)
- £500,000 (for returns from 2016 to 2017 onwards).
Lastly, you have to file a return if the property is owned completely or partly by a company, partnership (where any of the partners is a company), or collective investment scheme.
Chargeable amounts for the current tax year
The ATED year runs from 1 April to 31 March, with tax returns and payments due on 30 April in the following tax year. So, returns for the 2023/24 ATED year are due on 30 April 2024.
For 2023/24, the ATED charge is as follows for dwellings valued at:
- £500,000 to £1 million — £4,150
- £1 million to £2m — £8,450
- £2 million to £5m — £28,650
- £5 million to £10m — £67,050
- £10 million to £20m — £134,550
- Over £20 m — £269,450.
These figures are subject to change with each subsequent ATED year.
Valuing your dwelling
Under HMRC rules, you’re allowed to decide the value of the property yourself or bring in a professional to value it for you. You should use an “open-market willing buyer, willing seller basis” to value your property.
If part of the property you own is used as a residence and other parts for other purposes, the ATED will only be due on the value of the parts of the property used for residential purposes.
You have to revalue the property every five years. The last revaluation date was 1 April 2022 so the next will be 1 April 2027. However, if you sell part of a property for more than £40,000, you will likely have to carry out a new valuation that you must then report to HMRC.
Newly acquired or newly built dwellings and ATED
If you purchase a dwelling, your first ATED return will be due in the following 30 days.
For newly-built dwellings, or ones that will soon be constructed, you have 90 days from the date that your local authority included the dwelling on its council tax roll to file an ATED return.
It is possible to claim ATED relief to reduce your tax liability or, under certain circumstances, exempt you from the tax entirely.
You may be able to claim relief for your property if it is:
- let to a third party on a commercial basis and is not, at any time, occupied (or available for occupation) by anyone connected with the owner
- open to the public for at least 28 days a year
- being developed for resale by a property developer
- owned by a property trader as the stock of the business for the sole purpose of resale
- repossessed by a financial institution as a result of its business of lending money
- acquired under a regulated home reversion plan
- being used by a trading business to provide living accommodation to certain qualifying employees
- a farmhouse occupied by a farm worker or a former long-serving farm worker
- owned by a registered provider of social housing or a qualifying housing co-operative.
You can find more information about these reliefs and the conditions you need to meet in sections 30 to 41 in the Government’s ATED technical guidance.
ATED is an extremely complex part of the tax regime — from valuing your property to claiming relief. If you need help with any aspect of ATED, we’re here to help. Get in touch today or contact us on 020 3697 7147 where a member of our team is waiting to take your call.