Annual Tax on Enveloped Dwellings (ATED) 2026/27: A Guide for Property Companies
ATED explained for 2026/27: who pays, the band charges, available reliefs, annual return deadlines, and how higher SDLT at 15% applies on purchase of high-value residential property by companies.
What is ATED?
Annual Tax on Enveloped Dwellings (ATED) is an annual charge on UK residential properties held by corporate "envelopes" -- primarily companies. The term "enveloped" refers to the fact that the property is owned not by an individual but by a corporate structure that wraps around (envelops) the property.
ATED was introduced in 2013, initially targeting only properties valued over £2 million. The threshold has since been reduced in stages to £500,000, bringing many more properties within scope.
The charge was introduced to discourage holding high-value residential property in corporate structures purely to avoid SDLT (since selling a company owning a property avoids SDLT on the transfer). Combined with the 15% SDLT rate and CGT rules for enveloped property, ATED is part of a wider set of anti-avoidance measures.
Who is liable?
ATED applies to:
- UK and non-UK companies holding UK residential property.
- Partnerships where at least one partner is a company (corporate partnerships).
- Collective investment schemes (e.g. certain funds and unit trusts).
Individual owners, trustees of family trusts (where all beneficiaries are natural persons), and standard partnerships of individuals are not subject to ATED.
Property value threshold and valuation
ATED applies to residential dwellings with a value of more than £500,000.
The value used is based on the most recent valuation date:
- Properties are revalued every 5 years for ATED purposes.
- The current valuation date is 1 April 2022.
- The value used for the 2026/27 ATED charge is therefore based on the market value on 1 April 2022 (or the acquisition date if the property was acquired after 1 April 2022).
- The next revaluation date will be 1 April 2027 -- relevant from the 2027/28 ATED year.
For properties acquired after 1 April 2022, the acquisition value is used until the next 5-year revaluation date.
Residential dwelling: ATED applies to dwellings used or suitable for use as a dwelling. Commercial property (offices, shops, warehouses) is not subject to ATED. Mixed-use properties may be partially within scope.
ATED band charges 2026/27
The ATED charge depends on which value band the property falls into. The bands and charges are uprated annually in line with CPI inflation. For 2026/27, the indicative charges are approximately:
| Property value band | Annual ATED charge (approx.) |
|---|---|
| Over £500,000 up to £1 million | £4,150 |
| Over £1 million up to £2 million | £8,450 |
| Over £2 million up to £5 million | £28,650 |
| Over £5 million up to £10 million | £67,050 |
| Over £10 million up to £20 million | £134,550 |
| Over £20 million | £269,450 |
Note: The exact 2026/27 figures are confirmed by HMRC each spring via a statutory instrument. Check HMRC's ATED guidance for the confirmed rates.
If a property moves between bands due to market value changes (at the 5-year revaluation date), the new band rate applies.
ATED reliefs
ATED is not payable if a qualifying relief applies. Reliefs are available for the following uses:
1. Property rental business relief
The most commonly used relief. Available where the company:
- Carries on a property rental business in relation to the dwelling.
- The property is genuinely let on commercial terms to unconnected third parties.
"Commercial terms" means market rent, arm's length tenancy agreements. Letting to a connected person (e.g. the company's shareholder or a director) does not qualify.
If a property is sometimes vacant between lettings, relief continues to apply during the vacancy if the intention to re-let is genuine and the property remains available.
2. Property developer relief
Available where the company:
- Carries on a property development trade.
- Has acquired the property for development and resale, not retention.
- The property is not being used as a dwelling during the development period.
This relief applies to the period from acquisition through development and until sale. Once a developed property is retained for letting or other use, the relief ceases.
3. Property trading relief
Available where the company:
- Carries on a property trading business (buy to sell, not buy to let).
- Acquired the property in the course of that trade.
- Has not granted a "non-qualifying lease" (e.g. a long residential lease).
4. Financial institutions and repossessed properties
Banks and other financial institutions that have repossessed a property may claim relief for the period they hold it pending sale.
5. Farmhouses
Where a dwelling is a farmhouse forming part of a working farm, and the occupant is a working farmer.
6. Caretaker accommodation
Properties occupied by employees providing services to the company in connection with the property itself (e.g. a caretaker flat in a commercial block -- if the flat is residential).
7. Charitable use
Properties used for charitable purposes.
How to file an ATED return
Even if a relief applies, companies may still need to file an ATED return to claim the relief:
- If ATED is due: file and pay by 30 April of the ATED year (the ATED year runs 1 April to 31 March).
- For newly acquired properties: file within 30 days of acquisition.
- Relief claim: file an ATED return claiming the relevant relief -- no payment required.
- If the property is sold during the year: the ATED charge is proportionate. File an amended return after disposal to reclaim overpaid ATED.
ATED returns are filed online via HMRC's ATED online service. You will need to set up an ATED service credential (separate from your normal Corporation Tax Gateway credentials).
Late filing penalties apply: £100 for up to 3 months late, rising to £1,000 + daily penalties for extended delays. The charge itself also attracts interest if paid late.
ATED and Capital Gains Tax
Properties within the scope of ATED (or that would be within scope but for a relief) are subject to CGT at the standard rate on disposal, not corporation tax. This is an important distinction:
- UK companies normally pay corporation tax on gains (currently 25%).
- For enveloped dwellings within ATED scope, the gain is charged to ATED-related CGT at 24% (the higher-rate CGT rate for residential property in 2026/27).
- The ATED-related CGT applies to the gain accrued since 6 April 2013 (or from the date of acquisition if later), using the April 2013 value as a base.
This prevents companies from sheltering residential property gains from higher CGT rates by using the lower corporation tax rate.
15% SDLT rate on purchase
When a company, corporate partnership, or collective investment scheme purchases a residential dwelling worth more than £500,000, a flat 15% SDLT rate applies to the entire purchase price.
This flat rate is significantly higher than the standard residential rates (which rise to 12% on the portion above £1.5 million for individuals). It is designed to discourage new "enveloping" of residential property.
Example: a company buys a £1.5 million residential house:
- Standard SDLT (individual rates with the 5% surcharge for company): complex calculation.
- Company 15% flat rate: 15% x £1,500,000 = £225,000 SDLT.
Reliefs from the 15% rate are available and mirror the ATED reliefs: property rental business, property developer, property trader, financial institution.
If a company acquires a property relying on the property developer or trader relief from the 15% SDLT, and then does not comply with the relief conditions (e.g. retains the property instead of selling it), the SDLT relief is clawed back with interest and penalties.
Practical considerations for property companies
- Review your portfolio against the £500,000 threshold at each 5-year revaluation date. Properties that were under £500,000 at the last review may now be above it.
- Ensure reliefs are properly documented -- HMRC can challenge claims. Keep tenancy agreements, development plans, and other evidence of qualifying use.
- Calendar the April 30 filing deadline -- ATED penalties apply even for nil-charge returns (where only a relief claim is being made).
- On acquisition: consider ATED from day one. If you are acquiring a property over £500,000 into a company, you need to file within 30 days and consider the 15% SDLT rate.
- Restructuring: companies that hold properties solely to avoid SDLT on transfer may find the combined ATED + CGT + 15% SDLT charge on purchase makes the structure unattractive. Take specialist tax advice on whether "de-enveloping" (transferring the property out of the company) makes sense.
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Frequently asked questions
What is ATED?
Annual Tax on Enveloped Dwellings (ATED) is a tax that applies to residential properties worth more than £500,000 held by companies, partnerships with corporate members, or collective investment schemes. It is an annual charge based on the property's value band.
What is the ATED threshold in 2026/27?
ATED applies to residential properties with a market value of more than £500,000 as at the most recent valuation date. Properties valued at £500,000 or less are outside the scope of ATED.
Who has to pay ATED?
Companies (UK or non-UK), partnerships where at least one partner is a company, and collective investment schemes that own UK residential property worth more than £500,000 must file an ATED return and pay the charge (unless a relief applies).
Are there reliefs available from ATED?
Yes. The most common reliefs are: property rental business relief (letting the property commercially), property developer relief, property trader relief, caretaker accommodation relief, farmhouses, and charitable use. A relief claim means no ATED is payable but an ATED return must still usually be filed.
When is the ATED return due?
For properties held on 1 April, the ATED return and any payment are due by 30 April of that year. For newly acquired properties, the return must be filed within 30 days of acquisition.
What is the higher SDLT rate for companies buying residential property?
Companies purchasing residential property valued at more than £500,000 pay a flat 15% SDLT rate (rather than the standard residential rates). This is in addition to any SDLT surcharge. Certain reliefs apply (e.g. property trader relief, rental business).
How often must ATED property valuations be updated?
Property values for ATED are based on a revaluation date every 5 years. The current valuation date is 1 April 2022. So the value used for 2026/27 ATED is based on what the property was worth on 1 April 2022 (or the date of acquisition if more recent).
Can ATED be reduced by claiming multiple reliefs?
Only one relief is needed to eliminate the charge -- ATED is either payable in full or not at all for each property. If a property qualifies for a relief, no ATED is due on it (though a return may still be required).
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