Understanding ATED: What Property Businesses Need to Know

For businesses that own UK residential properties worth £500,000 or more through a company, partnership with a corporate partner, or a Limited Liability Partnership (LLP), the Annual Tax on Enveloped Dwellings (ATED) is an important consideration. ATED is a self-assessed charge, and failure to comply can result in penalties from HMRC.

Why Does ATED Exist?

The UK government introduced ATED in 2013 to discourage companies from holding high-value residential properties in a way that avoids Stamp Duty Land Tax (SDLT). While this tax aims to prevent tax avoidance, it’s important for businesses to understand how it applies to them and what reliefs may be available. While some businesses have legitimate reasons for owning property in corporate structures, ATED ensures that these ownership models do not provide unintended tax advantages.

Who Needs to Pay ATED?

ATED applies to UK residential properties held by:

• Companies
• Partnerships with a corporate partner (mixed partnerships)
• Limited Liability Partnerships (LLPs)

Mixed partnerships and LLPs are only within scope of ATED, if the residential property is not held for trading purposes.

It is important to note that ATED is charged on each individual property, rather than the total portfolio value.

ATED Charges and Deadlines

The ATED year runs from 1 April to 31 March, and the tax must be paid by 30 April each year. If a property is purchased mid-year, the return must be submitted within 30 days of acquisition, or within 90 days for new builds once they are first occupied or become subject to Council Tax.

The ATED charge for 2025/26 is based on the 1 April 2022 valuation and ranges from £4,450 for properties valued between £500,000 and £1 million, to £292,350 for properties worth more than £20 million.

Properties must be revalued every five years, with the next statutory revaluation date set for 1 April 2027.

Reliefs and Exemptions

Relief from ATED may be available if the property is:

• Let commercially to a third party with no occupation by the owner or connected persons
• Open to the public for at least 28 days a year
• Used for property development, trading, or as a farmhouse occupied by a farm worker
• Owned by a registered social housing provider or charitable company

Even if a relief reduces the charge to nil, an ATED return and a Relief Declaration Return must still be submitted.

Some properties are exempt from ATED altogether, such as those owned by charities for charitable purposes, public bodies, and organisations established for national purposes (e.g., trustees of the British Museum). In these cases, no ATED return is required.

New Valuation Triggers

A new property valuation may be required before the next official revaluation date if:

1. A company sells part of a property for more than £40,000 (which could result in a lower or higher ATED charge).
2. A company acquires an additional interest exceeding £40,000 in an existing ATED property (such as purchasing a lease extension).

Development work does not trigger a new valuation, but it may move the property into a higher ATED band when the next formal valuation takes place.

How We Can Help

Navigating ATED obligations can be complex, and ensuring compliance while making use of available reliefs is crucial for businesses holding residential property.

For example, we recently helped a property investment company that owned multiple residential properties restructure its holdings to maximise available reliefs and reduce its ATED liability. By carefully assessing their eligibility for reliefs and ensuring timely submissions, we were able to help them achieve significant tax savings while remaining fully compliant.

Need help navigating ATED?

Our Corporate Tax team can assist with:

• Assessing whether ATED applies to your properties
• Determining eligibility for reliefs and exemptions
• Submitting accurate and timely ATED returns
• Providing strategic tax planning advice

We’re here to help you stay compliant while optimising your tax position.

If you have any questions about ATED or need tailored guidance, please get in touch with our Corporate Services team on 01932 830664 or email enquiries@wardwilliams.co.uk