Are you Liable to pay ATED?
The Annual Tax on Enveloped Dwellings (ATED) is changing in April this year, and in April next year. ATED used to be known as Annual Residential Property Tax, and came into effect in April 2013.
How does ATED Work?
ATED is a tax applied to residential properties (dwellings as HMRC classes them) which are owned entirely or in part by a company, a corporate member, or as a collective investment vehicle. In these instances, the dwelling is considered to be enveloped because the property ownership sits within a corporate wrapper or envelope.
If the following applies, you may need to complete an ATED Tax Return for your property:
- It is based in the UK
- It’s value is £2 million pounds plus on the 1st April 2012 or at time of purchase if bought after this date
- The property is owned in full or in part by a ‘collective investment vehicle’. A unit trust for example
How Much do I Tax do I have to Pay Under ATED?
The amount you have to pay is dependent upon the value of the dwelling and will change year on year. ATED is linked to the Consumer Price Index, and as such changes in your ATED tax bill are inevitable.
|Property Value||Tax payable until April 2015|
|Between £2 million and £5 million||£15,400|
|Between £5 million and £10 million||£35,900|
|Between £10 million and £20 million||£71,850|
|More than £20 million||£143,750|
Changes to ATED from April 2015
In April 2015 a new band will be added. This will lower the threshold of ATED to make properties valued between £1 million and £2 million liable for the tax. The tax is set at £7,000 for this band of property. HMRC has applied a transitional rule, whereby property owners must file their tax return for the 1st October 2015 and pay by the 31st October 2015
Changes to ATED from April 2016
In April 2016 a new band comes into effect. From this point forward a property valued between £500,000 and £1 million will be hit with a tax of £3500. Going forward charges will be indexed in line with the previous year’s September Consumer Price Index.
Exceptions to ATED
Some dwellings are not subject to ATED:
- Guest houses
- Boarding school accommodation
- Student halls of residence
- Military accommodation
- Care homes
- Historic Houses – This applies if the property is mostly open and accessible by the public, and the property is being used for a commercial profit seeking purpose.
- Farm Houses – The property must be used for a commercial profit seeking purpose, and a ‘farm worker’ who has a connection to the owner occupies the property.
Don’t be Caught out by Capital Gains Tax (CGT)
As well as the expansion of ATED in April 2015, Capital Gains Tax (CGT) for non- UK residents will come into effect too. From April this year, the payable tax at the time of disposable rises to 28%. Unlike ATED, this will include dwellings used for letting purposes.
What can I do about ATED and CGT?
The best option is to talk to me. I am a fully qualified and award winning financial planner, with vast experience in tax management. There are various clauses to ATED and CGT which may reduce the amount of tax you have to pay, and possibly reduce it to nil.