Overview
Broadly, companies, partnerships with company members and collective investment schemes, fall within the ATED regime if they hold an interest in a UK residential property worth more than £500,000 at the last revaluation date (which occurs every 5 years) or at the date of acquisition, if later.
For the ATED year 1 April 2026 – 31 March 2027, any residential property interests held by a relevant entity at 1 April 2026 worth more than £500k at the valuation date of 1 April 2022 (or the acquisition date or date the build/conversion/development completed if acquired/created later than that) will fall within the regime, and have to file a return with HM Revenue & Customs (HMRC) by 30 April in the relevant year (so 30 April 2026 for the 2026/27 ATED year), or 30 days from the date of acquisition or date the build/conversion/development completed if acquired in a year (although in some exceptional cases this can be 90 days).
For the year-ended 31 March 2027, the returns and ‘relief declarations’ (see below – the returns required to claim the relevant reliefs (one ‘relief declaration’ per relief claimed) – note the reliefs must be claimed) are due to be submitted by 30 April 2026 where UK residential property is held (acquired before the year) that meets the above value test.
The ‘taxable value’ is the market value on the last previous valuation date, 1 April 2022. Other valuation dates apply in certain circumstances, broadly where a person acquires, completes the build/development of, or part-disposes of an interest for which the consideration is £40,000 or more.
Companies and partnerships with limited company partners should therefore consider the valuations at 1 April 2022 of any residential properties held, and consider arranging a formal valuation of any residential properties owned by a relevant entity where you consider the value at 1 April 2022 may have been sufficiently close to the £500,000 threshold.
Acquisitions and finalised construction or development of properties since 1 April 2022 also needs to be considered.
Annual ATED charges
ATED chargeable periods are 12 months from 1 April to 31 March. The tax is currently charged for a chargeable period if, on any day within that period, a company (or partnership with a corporate member or collective investment scheme) is entitled to the interest from the single dwelling, that has a market value of more than £500,000.
The charge is apportioned if the dwelling only falls within the ATED regime for part of the year.
The ATED annual charges for the year-ended 31 March 2027 (i.e. the 2026/27 tax year: 1 April 2026 to 31 March 2027) are as follows:
| Value of the property interest | Annual ATED charge |
| £500,000 and under | Outside of the scope |
| £500,001 – £1,000,000 | £4,600 |
| £1,000,001 – £2,000,000 | £9,450 |
| £2,000,001 – £5,000,000 | £32,200 |
| £5,000,001 – £10,000,000 | £75,450 |
| £10,000,001 – £20,000,000 | £151,450 |
| Above £20,000,000 | £303,450 |
Reliefs:
There are a number of reliefs from ATED that can be claimed via a ‘Relief Declaration Return’. These including the following:
- Property rental business – properties let at a commercial rate to independent unconnected tenants (i.e. no one connected to the Company, directors or shareholders);
- Dwellings open to the public for at least 28 days a year;
- Properties being developed for resale by a property developer;
- Properties held as trading stock for the sole purpose of resale by a property trader;
- Properties held by a financial institution as a result of repossession as a result of its money lending business;
- Acquired under a regulated home revision plan;
- Properties 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;
- Properties owned by a registered provider of social housing or a qualifying co-operative.
There are also some exemptions for charities, public and national bodies and dwellings conditionally exempt from inheritance tax. Where one of these exemptions applies (as opposed to one of the reliefs listed above), the exemptions does not need to be claimed by filing a return.
However, crucially, any non-qualifying use of the property (e.g. use by a shareholder or person connected with a shareholder) can nullify the cover of a relief, resulting in an ATED charge.
Claims
The ATED annual charge is assessed via a self-assessed return. An application form is available on the HMRC website enabling taxpayers to apply for a pre-return banding check to determine which ATED band a property falls into. Albeit, we would suggest seeking a formal valuation form an RICS valuation specialist if you are uncertain as to the value of a residential property.
The returns and payments under the annual tax on enveloped dwelling (ATED) regime are due by 30 April at the beginning of the ATED return period each year. A return has to be made for each dwelling where any ATED liability is due. When dwellings are acquired, the return and payments will be due within 30 days. If the dwelling is newly built, the return and payment must be made within 90 days of the earliest of first occupation or first becoming a dwelling for Council Tax purposes.
Where an annual charge does not arise due to the availability of relief for chargeable period, it is still necessary to file a return and claim the relief. The relief is claimed by completing and submitting a ‘Relief Declaration Return’ (one per relief being claimed).
The filing date for the required returns and the payment of any annual charge (where required) is 30 April.
Where an exemption applies, a return does not need to be completed and submitted, albeit it would be prudent to seek advice as to whether an exemption does, in fact, apply.
Penalties
Please note that you may have to pay a penalty and interest if:
- You don’t send HM Revenue & Customs a return, relief declaration or payment
- You send HM Revenue & Customs a late return, relief declaration or payment
- Your return or relief declaration is incorrect or has a mistake
Failure to submit a return will result in an initial penalty of £100 followed by daily penalty of £10 per day for up to 90 days (max £900) if more than 3 months late. There will also be 5% of tax due or £300, if greater for 6 months and 12 months late filing.
Penalties also apply to failure to pay the ATED charge in time. The late payment penalties are as follows:
- 5% of tax due (30 days late)
- 5% of tax outstanding at that date (6 months late)
- Further 5% of tax outstanding at that date (12 months late)
If the ATED filing is more than 12 months late, HM Revenue & Customs will base the penalties on the behavior:
- deliberate and concealed withholding 100% of tax due, or £300 if greater.
- deliberate but not concealed 70% of tax due, or £300 if greater.
Reductions apply for prompted and unprompted disclosures.
Summary
Limited companies and partnerships with limited company partners owning residential property/interests in a residential property in excess of £500,000 need to be aware of these rules and take action, where required.
This publication has been prepared by RRL LLP. It is to be treated as a general guide only and is not intended to be a comprehensive statement of the law or represent specific tax advice. No liability is accepted for the opinions it contains, or for any errors or omissions. All rights reserved.
