ATED returns for 2025/26

The annual tax on enveloped dwellings (ATED) is a tax that is payable mostly by non-natural persons (mostly companies) owning UK residential property valued at more than £500,000. Unless one of the exemptions applies, the company will need to submit an ATED return and pay the tax due for each chargeable period. With the 2025/26 tax year now underway, it’s a good time to review your obligations and ensure your property holdings are correctly reported to HMRC.

Who needs to file an ATED return?

ATED applies to non-natural persons — chiefly limited companies, but also partnerships, trusts, and other corporate entities — that own a chargeable interest in a UK residential property valued at more than £500,000. The key word here is “chargeable interest”: this typically means legal ownership, but it can also include certain leasehold interests and options to acquire property.

Individual property owners (natural persons) are exempt from ATED, which is why many smaller family holdings don’t fall within the regime. However, if you own residential property through a company structure — whether for buy-to-let purposes, family succession planning, or investment — you almost certainly need to consider whether ATED applies.

Properties used for business purposes (such as a hotel) or mixed-use buildings (where residential is ancillary) may fall outside the scope, but this requires careful analysis. If you’re unsure whether your property is “residential” for ATED purposes, it’s worth getting professional advice early.

ATED rates and thresholds for 2025/26

ATED is charged on a sliding scale based on the property’s market value. The threshold remains at £500,000, and the annual charges for the 2025/26 tax year are:

• £500,001–£1 million: £3,850
• £1 million–£2 million: £7,700
• £2 million–£5 million: £23,050
• £5 million–£10 million: £57,650
• £10 million–£20 million: £115,650
• Over £20 million: £231,250

These figures are fixed annual amounts, not percentages, which means the tax burden doesn’t scale linearly with property value. It’s important to get the valuation right: undervaluing can result in penalties, whilst overvaluing means paying more tax than necessary.

Returns must be filed with HMRC within 30 days of the date the return was issued. HMRC typically issues returns in April of each tax year, so expect your filing deadline to fall in May. Missing this deadline will incur an automatic £100 penalty, with further penalties for continued non-compliance.

Key exemptions and reliefs

Not every property held by a company is subject to ATED. Several exemptions exist, and it’s worth checking whether yours qualifies:

• Dwellings in use as main residence: If the property is genuinely occupied as a main home, and the company’s main purpose is to manage that dwelling, an exemption may apply.
• Properties held by property traders: Companies actively trading in property development or dealing may be exempt.
• Certain institutional investors: Housing associations and some regulated entities have carve-outs.
• Furnished holiday lettings: Properties let commercially as holiday accommodation may be outside the scope.

These exemptions have strict conditions, and HMRC takes a dim view of incorrect claims. If you believe an exemption applies, document your position carefully and keep contemporaneous records demonstrating the property’s use and the company’s purpose.

Valuation and return filing

Getting the property valuation right is crucial. HMRC requires the market value as of 1 April for that tax year, or the actual purchase price if acquired within the preceding 12 months — whichever is lower. If you can’t agree a value with HMRC, both parties can refer the matter to a professional valuer.

Returns are filed online via HMRC’s ATED online service. If you haven’t registered yet, you’ll need to set up an account using your Unique Taxpayer Reference (UTR) or company registration number.

Get ahead for 2025/26

The ATED regime is here to stay, and compliance is not optional. With rates and thresholds confirmed, now is the ideal time to review your property holdings, verify your valuations, and ensure all returns are submitted on time.

For tailored advice, contact Severn Accounting — we’re here to help.