Annual Tax On Enveloped Dwellings (ATED) for Landlords Explained

Owning property through a limited company can reduce your tax burden, although this does present other tax obligations. The UK government introduced ATED in 2013 to tackle the avoidance of Stamp Duty Land Tax, or SDLT. This was a new tax on residential properties owned either partly or completely by a company. Some exemptions and reliefs do apply – read on to find out more about ATED, how it is calculated, and how you can reduce your tax obligations under ATED.

Table of Contents

What Does Annual Tax on Enveloped Dwellings (ATED) Mean?
What is the Definition of Dwelling in ATED?
What is an ‘Enveloped Dwelling’?
How is ATED Calculated?
How to File for ATED
Exemptions and Reliefs to ATED

What Does Annual Tax on Enveloped Dwellings (ATED) Mean?

ATED, or annual tax on enveloped dwellings, is a tax payable by Non-Natural Persons (NNPs), i.e. companies that own residential property valued at above £500,000. Property investors who own property in their own name, i.e. not through a company or partnership, are not eligible for ATED.

What is the Definition of Dwelling in ATED?

A ‘dwelling’ is a property that can be used – either partly or fully – as a residence, e.g. a house or flat. This includes any outdoor space like gardens or grounds. If the building is mixed-use and part of it is not used as a residence, then ATED will only apply to the value of the residential part of the building. If the property is divided into self-contained flats, then each one is considered a separate dwelling and the ATED tax applies to their value as separate dwellings.

What is an ‘Enveloped Dwelling’?

An ‘enveloped dwelling’ is one that is owned by a company, partnership or collective investment scheme.

How is ATED Calculated?

ATED is calculated based on the value of the property, specifically, the value of the residential portion of the property if it is mixed-use. Properties that are eligible for ATED must be revalued every 5 years. For example, if you acquired a property on or before 1st April 2022, you would use the property’s value as of 1st April 2022 to determine whether you need to pay ATED and how much tax is owed. If you acquired the property after 1st April 2022, the value on the date you acquired it would be the value used to calculate the ATED.

Here are the rates at which ATED is charged for the current tax year:

Chargeable Period	Property Value	ATED charge
01/05/2024 – 31/03/2025	Less than £500,000	0
	£500,000 – £1 million	£4,400
	£1 – 2 million	£9,000
	£2 – 5 million	£30,550
	£5 – 10 million	£71,500
	£10 – 20 million	£143,550
	£20 million+	£287,500

See more information and rates for previous years on the HMRC website.

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How to File for ATED

You can register online with HMRC for the ATED service to submit your return online. To do this, you will need the registered name of your company or agency along with your Unique Taxpayer Reference, or UTR. You will also need the details of your property or properties, including the address, value and title number. The property can be valued by a professional, or you can work out the value of the property yourself, although you must retain evidence that you based the property’s value on if you do it yourself. Intentionally undervaluing a property to avoid ATED will incur penalties.

If you aren’t sure which value band your property falls into, say if it falls within 10% of a banding threshold, you can ask HMRC for a pre-return banding check or PRBC. This will confirm whether or not your valuation is acceptable. PBRCs can help avoid any potential ambiguity in the value of the property and the amount of tax owed.

Exemptions and Reliefs to ATED

There are some reliefs and exemptions to ATED that could reduce your tax obligations or even mean you won’t have to pay ATED at all, including:

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

Source: HMRC

You can claim these reliefs when you file for ATED using the online service. Even if you think reliefs will apply, you still need to file your return online and submit a Relief Declaration Return. The only exemption to this is if you are a charitable company using the dwelling for charitable purposes, public bodies or bodies established for national purposes as per the ATED technical guidance document published by HMRC.

ATED can be complicated, especially with the amount of calculations, exemptions and filing requirements needed. Owning properties through limited companies can still have significant tax benefits, but it does need some special attention to ensure you avoid filing errors, expensive penalties or opportunities for relief. I would always recommend that you seek professional advice from an accountant who specialises in property taxes, as they can help with obtaining an accurate property valuation, explain what taxes are due, assist with pre-return banding checks if needed, and advise on how to claim all available reliefs and exemptions. By working with an experienced accountant, you can fulfil all tax obligations and maximise the benefits of owning property through a limited company.

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