Introduced in 2013, Annual Tax on Enveloped Dwellings was aimed at controlling the indirect ownership of residential properties in the UK. Indirect ownership refers to owning a property by a non-natural person like a company or corporate body. As people used to hide their properties by transferring them to corporate bodies to avoid or minimize taxes like Stamp Duty Land Tax (SDLT), etc.
In this blog, we’ll be discussing:
- What is ATED?
- What is Dwelling?
- How to determine the value of your property?
- How much to pay?
- How to submit ATED returns?
Understanding Annual Tax on Enveloped Dwellings :
ATED is the acronym of Annual Tax on Enveloped Dwellings. It is a type of property tax that is levied on the companies containing a residential property in the UK. This tax is only payable by companies possessing a residential property worth above £500,000. You have to pay tax on your residential property if you are:
- A company
- Partnership having corporate members
- Collective investment schemes like; trust, unit, or open-ended investment company
You also need to submit returns on or after 1st April to 31st March within the chargeable period.
Reach out to minimize your tax liabilities!
What is Dwelling?
Your property would be classified as a dwelling if you are using a part or whole of it for residence or personal use like for a flat or house, etc. You should remember that dwelling doesn’t include the following residence types:
- Cares Home
- Boarding school
- Student halls
- Military accommodation
Section 19 of ATED provides a detailed note on a dwelling.
How to Determine The Value of Property?
To file a return, you should know the value of your residential property. You can find out the value of your property on the basis of the amount that you bought it for. 1 April 2012 is the initial valuation date if your residential property is owned on that date or at a previous date or after that date. There is a fixed revaluation date for all properties after the duration of 5 years. For e.g. 1st April 2012, then 1st April 2017, and 1st April 2022.
The valuation process of HMRC is quite strict. Interest or penalty may be charged by HMRC if the value of your property is incorrect.
Our accountants can help you determine your property’s value. Talk to us now!
How Much to Pay?
You need to pay ATED as per the worth of your residential property. HMRC has divided them into different bands based on the value of their property. Here is the list:
Chargeable amounts for 1 April 2021 to 31 March 2022
- For properties that cost more than £500,000 up to £1 million, an annual tax of £3,700 is payable.
- For properties that cost more than £1 million up to £2 million, an annual tax of £7,500 is payable.
- For properties that cost more than £2 million up to £5 million, an annual tax of £25,300 is payable.
- For properties that cost more than £5 million up to £10 million, an annual tax of £59,100 is payable.
- For properties that cost more than £10 million up to £20 million, an annual tax of £118,600 is payable.
- For properties that cost more than £20 million, an annual tax of £237,400 is payable.
Key Takeaway: If you’re availing of relief on ATED, you have to submit Nil returns to HMRC before 30th April. You can get a relief claim declaration form to avail yourself of the relief.
How to Submit ATED Returns?
You can submit your returns using the government website. The submission must be done before 30 April each year. You can also hire an agent or an accountant to do ATED returns for you.
Let Us Deal With it:
We know that paying annual tax on enveloped dwellings and filing returns is a complex and exhausting process. Therefore, we recommend you take help from a qualified accountant before submitting ATED returns and making payments.
Accotax contains a team of certified chartered accountants in London. Our team will review your property’s value, tax rates and will find the best relief suitable for you. We’ll explore the possibilities to reduce your ATED.
Just contact us to share your property details!
Disclaimer: This blog provides basic information about the topic for your general understanding.