Whilst increases in property values are welcomed by most, this can have an unexpected impact for those owning residential properties falling within the Annual Tax on Enveloped Dwellings regime (ATED).
Since the introduction of ATED in April 2013, entities (corporates and “non-natural” persons such as partnerships) holding a UK residential dwelling have had to consider if the ATED rules apply and whether there is any ‘relief’ from an ATED charge.
What is the value of your property?
The ATED rules will ONLY apply if the market value of the property exceeds a set value taken at a prescribed point in time.
What is the relevant value?
Initially when the ATED rules Initially when the ATED rules were introduced the value was set at £2 million but from 1 April 2016 the key value has been £500,000.
What is the relevant date?
Up until now the relevant date in respect of the property’s market value was 1 April 2012 or acquisition whichever is later.
If a property’s value at this date was <£500,000 it did NOT fall into ATED so ATED could be ignored.
The ATED rules require a revaluation of existing properties every 5 years after 1 April 2012.For periods up to 31 March 2023 the valuation date is as above, i.e. 1 April 2017 or acquisition whichever is later. However from 1 April 2023 the key valuation date will change to 1 April 2022 or acquisition if later.
What does this mean?
Properties falling into ATED first time.
For the tax return due for 2023/24 which is due for filing by 30 April 2023 all existing properties will be required to be revalued at 1 April 2022. This could mean more properties are likely to breach the £500,000 limit and fall into the ATED regime for the first time.
It may of course be that in some cases the value of the property has fallen and the property falls out of the ATED regime however, this is rarer.
Properties already within the ATED regime where no relief available.
If no relief is available an ATED tax charge is payable. The charge is based on set ‘bands’.
ATED TAX BANDS AND CHARGES FOR 2022/23
|Valuation Banding||2022/23 ATED Charge|
|£500,001 – £1,000,000||£3,800|
|£1,000,001 – £2,000,000||£7,700|
|£2,000,001 – £5,000,000||£26,050|
|£5,000,001 – £10,000,000||£60,900|
|£10,000,001 – £20,000,000||£122,250|
|£20,000,001 and over||£244,750|
The revaluation at 1 April 2022 could result in a property falling into a higher ‘band’ and the ATED charge increasing quite substantially. For example a property which had a market value at 1 April 2017 of £900,000 could have a market value at 1 April 2022 of £1.1 million doubling the applicable ATED charge from £3,800 in the lower band to £7,700.
What do you need to do?
- Entities already claiming ATED reliefs (such as property developers or certain residential landlords) will not need to revalue the properties at 1 April 2022 provided the reliefs continue to apply.
- Other entities owning residential property should review their portfolios and the individual values of any residential properties at 1 April 2022 to ensure that any ATED compliance matters are known well in advance and complied with. . Whilst the revaluation date does not kick in until 2023 it is advisable to obtain the valuation in April 2022 rather than historically.
The ATED filing deadline for properties falling into the regime which are held at 1 April 2022 is 30 April 2022. This deadline applies whether or not there is a relief. These returns remain based on the value of the property at 1 April 2017 or acquisition if later.
If no relief is available then any 2022/2023 ATED charges are also payable by 30 April 2022.
It is also advisable to obtain valuations of properties held at 1 April 2022 as discussed above.
Please note – The ATED rules can be complex and the above just covers the change in the relevant date for valuation purposes which applies to all relevant properties held at 1 April 2022. Revaluations of properties may also be required in other circumstances and different deadlines apply to properties falling into the regime but not held at 1 April. These are not covered in this article.