Understanding ATED Returns for 2025/26: A Complete Guide for Property Companies
What is ATED?
The Annual Tax on Enveloped Dwellings (ATED) is a charge levied primarily on non-natural persons—typically companies—that own UK residential property valued over £500,000. If your company owns such a property and none of the exemptions apply, an ATED return must be filed, and the corresponding tax must be paid.
Key Filing Dates and Process
If your company holds a property subject to ATED on 1 April 2025, you must submit an ATED return from 1 April 2025 to 31 March 2026. This return must be filed by 30 April 2025.
Returns are typically submitted online via HMRC’s ATED service. If online filing isn’t an option, a paper form can be requested from HMRC. It’s advisable to allow at least two weeks for HMRC to process and receive the paper return.
If the property comes within the ATED charge after 1 April 2025, the return must be submitted within 30 days of the date it enters the charge.
Late submissions can lead to penalties, so timeliness is crucial.
Property Valuation Guidelines
ATED applies only to residential properties that exceed a value threshold of £500,000 and are not exempt. The relevant valuation date depends on the timing of the property’s acquisition:
- For properties owned on or before 1 April 2022, the key valuation date is 1 April 2022.
- For properties acquired after 1 April 2022, use the acquisition date as the valuation reference.
Tax Bands and Annual Charges for 2025/26
The ATED payable depends on the property’s value. Below are the charges applicable for the 2025/26 tax year:
| Property Value | Annual Charge |
|---|---|
| Over £500,000 up to £1 million | £4,450 |
| Over £1 million up to £2 million | £9,150 |
| Over £2 million up to £5 million | £31,050 |
| Over £5 million up to £10 million | £72,700 |
| Over £10 million up to £20 million | £145,950 |
| Over £20 million | £292,350 |
The tax must be paid by 30 April 2025, or within 30 days of acquisition if the property enters the charge after 1 April. If the property is only held for part of the tax year, the charge can be adjusted proportionately.
What Qualifies as a Dwelling?
Not every property is subject to ATED. The tax only applies to dwellings—residential properties such as houses or flats that are, or could be, used as a residence.
The following types of properties are not treated as dwellings for ATED purposes:
- Hotels and guest houses
- Boarding school accommodation
- Student halls of residence
- Care homes
Reliefs and Exemptions
Several exemptions and reliefs can remove a property from ATED liability. Key exemptions include:
- Commercial Letting: Properties let to third parties on a commercial basis, where no one connected to the company (like a director or shareholder) resides.
- Property Development: Properties held for development by a property development business.
It’s essential to apply for these exemptions properly to avoid unnecessary tax liability.
Final Notes
With strict deadlines and significant charges, compliance with ATED requirements is essential for companies holding high-value residential properties. Make sure valuations are current, filings are timely, and consider if any exemptions or reliefs apply to reduce your liability.
Reference: Finance Act 2013, Part 3