The annual compliance cycle for the tax introduced to combat “Mayfair Millionaires” is once again upon us. The ATED regime of course has been widened, such that the residential property no longer needs to meet the original headlines!  

All relevant entities that hold residential properties valued in excess of £500,000 at 1 April 2022, will soon need to take action as the 2025/26 ATED returns are due to HMRC by 30 April 2025.

If you believe you are due to submit an Annual Tax on Enveloped Dwellings (ATED) return, then now is the time to speak to your trusted business adviser at Johnston Carmichael. ATED is unusual in that it is a forward-looking tax, which does include  a number of valuable reliefs, however, these need to be claimed on an annual basis, to achieve a nil tax position.

What is ATED?

ATED is an annual tax payable mainly by companies (UK, non-UK incorporated and overseas companies) that own UK residential property valued at more than £500,000 on 1 April 2022 (or acquisition/completion date if later). The ATED regime also applies to a partnership with  corporate member(s), and collective investment schemes such as a unit trust or open-ended investment company.

A property falls within the ATED regime if it is a dwelling and all, or part of it, is used or could be used as a residence and includes any land that is occupied or enjoyed as part of the dwelling (e.g. a garden).

Non-residential properties, such as factories or shops, are outside the scope of ATED.  Non-UK properties are also out with the scope of ATED.

ATED returns are completed in advance of the upcoming tax year along with payment of any ATED charge due. Upcoming ATED returns for the period 1 April 2025 to 31 March 2026, are due to HMRC by 30 April 2025.

If a company acquires residential property part way through this period, the company will have 30 days, from the date of purchase to submit the ATED return covering the period from acquisition to 31 March, claiming any relief, or paying the ATED charge that falls due , pro-rated from the date of purchase to 31 March.

If a company disposes of residential property where an ATED return has been submitted and ATED charge paid, then an amended ATED return can be submitted allowing the company to reclaim a pro-rated amount of the ATED charge paid.

The ATED charge due will be dependent on the value of the property, which is principally based on a 1 April 2022 valuation.  A revaluation date may, however, be triggered for ATED purposes where substantial works have been carried out since 1 April 2022. If this is found to be the case, the property should be revalued for ATED purposes at the date the works are complete, and this value is instead used when determining the valuation banding the dwelling falls within.

HMRC have confirmed that ATED charges for the 2025/2026 period are as follows:

Chargeable amounts for 1 April 2025 to 31 March 2026

Penalties will be levied by HMRC for the non-compliance and can be as much as £1,600 per ATED return.

Exemptions and reliefs

There are valuable reliefs available if specific facts are present, but an ATED return will need to be completed, and relief claimed. If no return is completed, penalties will apply and interest will be charged if an ATED charge was due.  Relief may be available for:

• Farmhouses
• Property rental businesses (e.g. FHL’s including those rented via Airbnb/equivalent)
• Properties opened to the public
• Properties occupied by employees, in the normal course of their duties
• Property developers and traders.
• Financial institutions acquiring properties in the course of lending;
• Providers of social housing.

Special rules also apply from 1 April 2022 where the dwelling is provided as part of the Homes for Ukraine sponsorship scheme.

There are also exemptions for residential property owned by a charity and held for charitable purposes, properties held by public bodies and bodies established for national purposes, and properties conditionally exempt from inheritance tax meaning no ATED return is required.

The gradual reduction of the entry level banding and the increase in property values, means that many more properties are now within the scope of this tax. It is therefore good practice to review the ATED status of all residential property held by corporate entities or similarly impacted ownership structures.

Get in touch

If you would like to discuss whether you have an ATED filing requirement then please get in touch with your usual Johnston Carmichael adviser or Laura Ritchie.