The Annual Tax on Enveloped Dwellings (ATED) is the yearly charge that catches limited companies, partnerships with corporate members, and collective investment schemes when they hold a UK residential dwelling worth more than £500,000. It was introduced in 2013 to deter the use of corporate "envelopes" to escape stamp duty on high-value London homes, and the regime has expanded steadily since: the entry threshold dropped from £2 million to £500,000 over its first three years, the annual charges have risen with inflation, and the linked 15% flat-rate SDLT on corporate purchases has stayed in place.
For 2026/27, the headline figures matter to anyone holding a single dwelling above the threshold in a non-natural person: the smallest band pays £4,600 a year and the largest pays £303,450. Both numbers can be reduced to nil by claiming the right relief on the return, but the return itself is not optional. Missing the 30 April filing deadline produces an immediate £100 penalty even where no tax is owed, and the cascade gets sharply worse from there.
This guide is the pillar reference for the regime. It walks through who is caught, the 2026/27 bands, valuation and the five-year revaluation cycle, every available relief and exemption, how ATED interacts with SDLT, the annual return mechanics, the late-filing and late-payment penalty cascade, and the strategic question of whether to keep a property enveloped at all. Where a topic deserves its own dedicated guide (rental relief mechanics, the 15% SDLT interaction, penalty appeals) we link through to it.
Who Has to Pay ATED
ATED is a charge on non-natural persons that hold a chargeable interest in a single-dwelling interest worth more than £500,000 on the relevant valuation date. All three terms are defined in Finance Act 2013, and each does work in narrowing the population.
Non-Natural Persons
The regime catches three classes of holder:
- Companies, whether UK-incorporated or overseas. The most common case is a UK Ltd holding a single high-value house or flat, but offshore companies (BVI, Jersey, Guernsey) that own UK residential property are equally within scope. The Register of Overseas Entities and ATED operate in parallel, not in substitution.
- Partnerships with at least one corporate member. A general partnership of individuals is outside ATED. The moment one partner is a company, the entire partnership becomes a non-natural person for ATED purposes and the residential property it holds is potentially chargeable. This catches LLPs with a corporate member and family partnerships used to hold a London property.
- Collective investment schemes, including UK Authorised Investment Funds and overseas equivalents holding UK residential property.
Individuals, ordinary partnerships of individuals, and trustees (acting as trustees rather than in any corporate capacity) are outside the regime. A bare nominee company holding for an individual beneficial owner is also outside, because beneficial ownership rests with the individual.
Chargeable Interest and the Single-Dwelling Test
The charge bites on a "single-dwelling interest". A property that is sub-divided into multiple self-contained units (each with its own kitchen, bathroom, and locking front door) is treated as multiple single-dwelling interests, and each is tested against the £500,000 threshold separately. Conversely, a property held under two separate freeholds but used as one home is treated as one dwelling.
A dwelling is, broadly, a building that is used or suitable for use as a single residence, plus its garden and grounds. Properties undergoing reconstruction are not dwellings during the works if the building is genuinely not capable of occupation. Buildings irreversibly converted to non-residential use (the classic example being a former house converted to retail with stair access removed) are outside.
ATED Chargeable Amounts for 2026/27
HMRC publishes the chargeable amounts each year, indexed by reference to the Consumer Prices Index for the year ended in the previous September. The 2026/27 figures took effect from 1 April 2026.
| Property value on the relevant valuation date | Annual charge 2026/27 | For comparison, 2025/26 |
|---|---|---|
| More than £500,000, up to £1m | £4,600 | £4,450 |
| More than £1m, up to £2m | £9,450 | £9,150 |
| More than £2m, up to £5m | £32,200 | £31,050 |
| More than £5m, up to £10m | £75,450 | £72,700 |
| More than £10m, up to £20m | £151,450 | £145,950 |
| More than £20m | £303,450 | £292,350 |
The charge is for a full year of holding. Where a chargeable interest is acquired or disposed of during the year, or where relief is claimed for part of the year only, the amount is apportioned by reference to days in the period.
Valuation and the Five-Year Revaluation Cycle
ATED uses fixed valuation dates rather than annual valuations, which protects holders against year-on-year property price volatility but produces step-changes every five years.
The current valuation date is 1 April 2022. That value is used for the five chargeable periods from 1 April 2023 to 31 March 2028 (so it covers 2023/24, 2024/25, 2025/26, 2026/27, and 2027/28). The next revaluation date is 1 April 2027, and the value at that date will determine the band from 2028/29 to 2032/33.
For property acquired after 1 April 2022, the valuation date is the acquisition date, with subsequent valuations following the five-yearly cycle from the next revaluation point.
Valuation is the holder's responsibility, not HMRC's. If your value is within 10% of a band boundary you can request a Pre-Return Banding Check from HMRC, which gives confirmation of the band without committing HMRC to a specific value. The check is free and is generally recommended where being one band higher or lower would change the annual charge by more than the cost of a professional valuation (which it usually will at the larger bands). For the full mechanic on the 1 April 2027 revaluation, the acquisition-date rule, and the PRBC procedure see our ATED valuation date rules and 2027 revaluation guide.
The 15% Flat-Rate SDLT on Acquisition
ATED is the annual cost of holding an enveloped dwelling. The acquisition cost is governed separately by Schedule 4A FA 2003, which imposes a flat 15% SDLT charge when a non-natural person buys a single dwelling for more than £500,000. The 15% rate replaces the ordinary slab rates (and the 5% additional dwellings surcharge, and the 2% non-resident surcharge) for that transaction.
The Schedule 4A reliefs broadly mirror the ATED reliefs: a property bought as commercial rental stock, as developer trading stock, or as part of a property trade is taxed at the standard SDLT rates instead of 15%. If the relief is lost within three years of acquisition (for example, a director moves into the property), HMRC can claw back the SDLT difference.
The interaction is critical at the planning stage: forming a company to buy a £1.5 million London house in 2026/27, without any qualifying relief, costs 15% SDLT (£225,000) on acquisition plus £9,450 a year ATED, before any consideration of corporation tax or extraction costs. Our dedicated guide to the 15% flat-rate SDLT and ATED interaction walks through the worked numbers.
Reliefs Available on the ATED Return
The most important practical feature of ATED is that the headline charge can almost always be reduced to nil if the property is in commercial use. Reliefs are not automatic. Each must be claimed on the ATED return (or on a Relief Declaration Return covering multiple properties), and the claim is for the period during which the relief applies, not necessarily the full year.
Property Rental Business Relief
The most commonly claimed relief. Available where the dwelling is let, or is being prepared for letting, on a commercial basis to one or more unconnected third parties. Use by anyone connected with the holder (a director, a shareholder, a spouse of either) breaks the relief for the period of use. Voids between tenancies are usually accepted as commercial use provided the property is being actively marketed.
Our dedicated guide to Property Rental Business Relief mechanics covers the connected-persons test, marketing-during-voids requirements, and the consequences of short stays.
Property Developer Relief
Available where the dwelling is held as trading stock of a property development trade carried on by the holder (with a view to its resale in the course of the trade). The holder must be carrying on a genuine property development business, not a one-off transaction. Personal occupation by a connected person, even temporarily during a renovation, breaks the relief.
Property Trader Relief
Available where the dwelling is acquired in the course of a property trading business and is held with the intention of resale. Distinct from developer relief in that no development activity is required; the asset is held as stock and sold on. The same connected-person occupation test applies.
Farmhouse Relief
Available where the dwelling is a farmhouse occupied by a farm worker, an ex-farm worker, or a surviving spouse of a farm worker, and the farming trade is carried on by the holder. The relief was introduced to ensure that working farmhouses are not penalised when the farm is held in a company.
Employee Accommodation Relief
Available where the dwelling is provided to a qualifying employee of a trading business carried on by the holder, the employee owns less than 10% of the company, and provision of accommodation is for the purpose of the trade.
Dwellings Open to the Public Relief
Available where the dwelling is open to the public for at least 28 days a year on a commercial basis, and the public access is a substantial part of the use of the property. Historic houses run as visitor attractions are the typical case.
Charitable Use Relief and Registered Provider of Social Housing Relief
Available, respectively, where the dwelling is held by a charity for charitable purposes, and where the holder is a registered provider of social housing using the dwelling for its social housing functions.
Demolition and Conversion
Where a dwelling is being demolished or converted to non-residential use, the property may fall outside the definition of a dwelling for the period of the works. Strictly this is a question of whether there is a dwelling at all rather than a relief, but the practical effect is the same.
Exemptions: Persons Outside the Regime
Distinct from reliefs (which reduce the chargeable amount to nil) are exemptions, which take the holder out of the regime entirely so that no return is required:
- Charitable companies where the dwelling is held for charitable purposes.
- Public bodies, including government departments and devolved administrations.
- Bodies established for national purposes (a narrow category covering specific named bodies).
The practical population caught by exemptions is small. The vast majority of non-natural persons holding sub-£500k dwellings escape on threshold grounds, not exemption grounds, and those above the threshold typically reach for a relief rather than an exemption.
ATED and Capital Gains: The Abolished Charge
Historic ATED guidance often refers to ATED-related CGT, a separate regime that taxed gains on the disposal of ATED-charged property. ATED-related CGT was abolished from 6 April 2019. Disposals of UK residential property by non-resident companies are now within the standard non-resident company corporation tax on chargeable gains regime introduced from the same date, and disposals by UK-resident companies are within ordinary corporation tax on chargeable gains.
For context on rates and the wider CGT position on company-held residential property, see our complete guide to CGT on UK property.
The Annual Return: 30 April Filing Mechanics
The ATED return is filed online via HMRC's ATED online service. The standard deadline is 30 April at the start of the chargeable period. For 2026/27 (1 April 2026 to 31 March 2027), the return was due by 30 April 2026.
Three points to note:
- Filing is required even where a relief reduces the charge to nil. Where every dwelling in your portfolio qualifies for the same relief, a single Relief Declaration Return can cover all of them and name the relief. Where reliefs differ between dwellings, or one dwelling loses relief during the year, separate returns are needed.
- Acquisition mid-year tightens the deadline. A return for a newly-acquired chargeable interest is due within 30 days of acquisition (or 90 days for a newly-built dwelling, defined by reference to the council tax valuation date). The 30-day window catches a lot of holding companies whose accountant assumes the next 30 April applies.
- Payment accompanies the return. ATED is paid in a single sum by 30 April (or by the return deadline for mid-year returns). There is no instalment scheme.
Returns must be amended within 12 months of the original filing where errors are discovered. After that window, errors are addressed by disclosure under HMRC's corrections regime. The full amendment procedure (forms, supporting evidence, and the interaction with FA 2009 Sch 55 penalties) is covered in our dedicated ATED return amendment and corrections procedure guide.
The Late-Filing and Late-Payment Penalty Cascade
The cost of missing the 30 April deadline mounts quickly even when no tax is due. The penalty cascade for late filing is:
| Timing from due date | Penalty |
|---|---|
| 1 day late | £100 fixed penalty |
| 3 months late | Daily penalties of £10 per day for up to 90 days (for some return types) following an HMRC notice |
| 6 months late | The greater of £300 or 5% of the tax due |
| 12 months late | A further amount of the greater of £300 or 5% of the tax due (rising to 70% or 100% where withholding is deliberate) |
For a single nil-relief return missed by a year, the holder is looking at £100 + £300 + £300, or £700, on a return that produces no tax. Multiply by the number of properties in a portfolio (each non-rental-relief-eligible dwelling needs its own return) and the cost compounds.
Late payment carries a separate regime:
- Interest from the due date of payment.
- A 5% penalty at 30 days late.
- A further 5% at six months late.
- A further 5% at twelve months late.
Inaccuracy penalties under Schedule 24 FA 2007 apply where a return understates the charge, ranging from 0% (reasonable care, prompted disclosure) to 100% (deliberate, concealed, unprompted disclosure). Our dedicated guide to the ATED late-filing penalty mechanics walks through worked examples and appeal grounds.
Appeals and Reasonable Excuse
A penalty can be appealed within 30 days of the notice. The principal grounds are reasonable excuse (an unforeseen event that prevented compliance and that ended as soon as the excuse ended, with the return filed without unreasonable delay) and, for daily penalties, special circumstances.
HMRC's published view treats ignorance of the obligation as a weak ground, although first-time-filing arguments from newly-incorporated holding companies have had mixed results at the First-tier Tribunal. Genuine illness of the responsible officer, late receipt of HMRC correspondence (when sent to a stale address), and unavailability of the online service have all succeeded as reasonable excuse in specific cases. Pure forgetfulness has not. For the full appeal procedure, the tribunal-grade reasonable-excuse case-law, and the special-circumstances route, see our ATED late-filing penalty appeal guide.
Practical Decision: Keep Enveloped, Dis-Envelope, or Claim Relief?
The framing matters here. ATED is a charge on holding, not on use, and the cost of the charge has to be weighed against the original reasons for putting the property into a company in the first place. The three live options for an existing holder are:
Claim a Relief and File a Nil Return
If the property is or can be put into commercial use by an unconnected third party, Property Rental Business Relief reduces the ATED charge to nil and the Schedule 4A 15% SDLT issue is irrelevant going forward. This is the standard outcome for a Ltd Co buy-to-let portfolio above the £500,000 threshold per property.
Pay the ATED Charge
If the property is held for a non-relievable reason (typically: occupation by a connected individual at no rent, occupation at below-market rent, or held as a future home), the charge has to be paid. For a £1m–£2m band property, this is £9,450 a year. For a £5m+ property, the calculus changes sharply: £75,450 a year for a £5m–£10m band property is well above the cost of unwinding the structure.
Dis-Envelope (Transfer the Property Out of the Company)
Transferring the property out of the company to an individual shareholder triggers SDLT on the market-value consideration (at the new 5% additional-dwellings rates if the individual already owns property), and a corporation tax disposal at market value for the company. The mechanics are complex and turn on whether the company is wound up and the property distributed in specie, or sold and the proceeds distributed.
For high-value enveloped family homes the dis-envelope decision has dominated planning advice since the 2015 ATED threshold extension to £500,000, and remains the typical answer where the property is occupied rather than let.
Where ATED Sits Alongside the Other Property Taxes
ATED is one of four UK tax charges that can apply to high-value residential property held by a non-natural person:
- SDLT on acquisition (the 15% flat rate under Schedule 4A FA 2003, plus the 2% non-resident surcharge where the buyer is non-UK-resident).
- Corporation tax on rental profits (covered in our guide to corporation tax rates for property companies in 2026/27).
- ATED, annually, on the value of the dwelling.
- Corporation tax on chargeable gains on eventual disposal (replacing the abolished ATED-related CGT for both UK and non-UK-resident companies).
The four charges interact, and the answer to "is corporate ownership the right structure?" depends on the answer to all four together rather than any one in isolation. Our guide to income tax rates for landlords in 2026/27 covers the personal-ownership counterfactual that the comparison runs against.
The Compliance Calendar in One Place
For a property company that holds one or more dwellings above the £500,000 threshold, the ATED-relevant dates in any given chargeable period are:
- 1 April: start of the chargeable period. Valuation reference date in revaluation years (next revaluation: 1 April 2027).
- 30 April: deadline for filing the ATED return and paying the charge for the year that began on 1 April.
- Within 30 days of any acquisition during the year (90 days for a newly-built dwelling): return and payment for the mid-year acquisition.
- Within 30 days of any loss of relief mid-year: amended return and payment of the apportioned charge.
- Within 12 months of filing: window to amend the return for errors before formal correction or disclosure procedures apply.
A clean ATED compliance routine for a corporate landlord pairs the 30 April filing with the year-end accounts work, so that the property valuation, relief claim, and any acquisitions or disposals during the year are picked up systematically rather than as a last-week-of-April scramble.