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How to Calculate and Submit Your Annual Tax on Enveloped Dwelling

Published by UK Property Accountants
Published Date: March 23, 2023

If you own a residential property in the UK that is valued over the threshold and is held within a corporate structure, you may be subject to Annual Tax on Enveloped Dwellings. This annual tax is designed to discourage the use of "enveloped dwellings" as a way to avoid paying taxes on high-value residential properties.

In this guide, we'll cover everything you need to know about ATED, including  who needs to pay it, how it's calculated, and what the deadlines are for filing your tax return.

So, whether you're a homeowner, a landlord, or a corporate entity, read on to learn more about ATED and how it could impact you.

Steps to Calculate your Annual Tax on Enveloped Dwellings

1. Determine if your property is within the scope of ATED

ATED (Annual Tax on Enveloped Dwellings) is a UK tax that applies to residential properties owned by companies, partnerships with corporate members, or collective investment schemes that are valued at over £500,000.

ATED Relief applying

2. Check if ATED Relief is applicable

There are certain exemptions and reliefs available that can reduce the amount of ATED payable.

This includes properties used for charitable purposes, properties held as part of a property rental business, and properties that are occupied by employees.

It's important to note that even if a property is exempt from ATED, an ATED return may still need to be filed with HMRC.

3. Determine the value of the property

To work out what you need to pay you’ll need to value your property using a valuation date. There are revaluation dates every 5 years from 1 April 2012.

The revaluation date for the 5 chargeable periods from 2023 is 1 April 2022.

You must use that date to revalue the properties you owned on or before 1 April 2022. If you acquire property after 1 April 2022, use the acquisition date.

4. Determine the Appropriate Band

The tax is calculated based on the value of the property. There are seven bands, ranging from £500,000 to over £20 million.

Chargeable amounts for 1 April 2024 to 31 March 2025

Property Value

Annual Charge

£500,001 to £1 million

£4,400

£1,000,001 to £2,000,000

£9,000

£2,000,001 to £5,000,000

£30,550

£5,000,001 to £10,000,000

£71,500

£10,000,001 to £20,000,000

£143,550

More than £20,000,000

£287,500

5. Calculate the Annual Tax

Once you know the appropriate band, you can calculate the proportionate annual charge for the number of days the property falls under ATED Annual charge.

Calculating the amount for Annual tax on enveloped dwellings

UK Property Accountants can help you evaluate your Annual Tax based on your Property value for year 2024/25 and take the burden off your shoulders. Added to the convenience is our General Guide to Annual Tax on Enveloped Dwellings that covers the subject with more detail, so you can file your returns with confidence.

6. Submit Your ATED Return

If your property is within the scope of ATED, you'll need to submit  ATED return to HM Revenue and Customs (HMRC). 

Additionally, you will need to pay the Annual Charge by the due date.

Please note that you will have to file the ATED Return even if no tax is due by claiming any relief.

Summary

It is important to verify whether you are under the scope of the Annual Tax on Enveloped Dwellings (ATED). If you are, please ensure necessary steps are taken to be compliant with ATED.

Failure to comply with ATED regulations may result in heavy fines and penalties.

Please contact us if you are still confused about whether you are subject to ATED. Our team of professionals can help you navigate the complexity of ATED.

Do you have more queries?

When you are submitting your ATED return, there are a few things that you need to keep in mind in order to guarantee that the filing process goes smoothly. This is where we can make a difference. 


 We, at UK Property Accountants have helped a lot of clients deal with HMRC investigations and various tax enquiries. Dont hesitate to reach out!

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