Residential properties are normally owned by individuals, but sometimes they are owned by companies, investment collectives or partnerships for commercial purposes. Such properties are said to be 'enveloped' because they are owned by a corporate entity
Annual Tax on Enveloped Dwellings (previously called Annual Residential Property tax) is payable on certain high-value (worth more than £500,000) enveloped properties. You need to complete an Annual Tax on Enveloped Dwellings (ATED) return and pay any tax due (between £4,150 to £269,450 for the year to 31 March 2024) depending on your valuation band, if your property meets all of the following criteria:
- is a residential property (a 'dwelling')
- is in the UK
- is owned completely or partially by a corporate entity such as a company, a partnership where one of the partners is a company, or a 'collective investment vehicle' - for example, a unit trust or an open ended investment company
- was valued at more than £500,000 when you bought it
You must revalue your property every five years. The 2023/24 tax year is a revaluation year. You must use the valuation date of 1 April 2022 or the date of acquisition if later, to revalue your property.
Various exemptions and reliefs can reduce or eliminate ATED.
Who must pay ATED?
ATED is payable if the property is owned by a company, corporate body or collective investment vehicle (such as a unit trust). It is also payable by partnerships which contain companies, corporate bodies or investment vehicles. It is not payable by individuals who own residential properties directly.
ATED is not payable by owners of hotels, guest houses, hospitals, care homes, student halls of residence, boarding school accommodation, military accommodation or prisons. It is also not payable on properties located outside the UK.
Other reliefs and exemptions may reduce ATED to nil. These include (but are not limited to):
- commercial farming companies which own a farmhouse occupied by a 'farm worker' connected to the company
- companies owning an historic house for commercial purposes which is open to the public or provides access to the dwelling for at least 28 days per year as part of its service (for example, as a wedding venue)
- charities using a dwelling for charitable purposes
- properties owned by a social housing provider or a qualifying housing co-operative
- let to a third party on a commercial basis
- being developed for resale by a property developer