What the Annual Tax on Enveloped Dwellings is, who pays it on London property, the 2026/27 bands, the reliefs, and what it means for a company purchase.

By Aldo Attanasio d’Aponte – September 9, 2026

ATED explained: the annual tax on company-owned London homes

The Annual Tax on Enveloped Dwellings, ATED, is a yearly charge on UK residential property worth more than £500,000 when it is owned by a company or similar structure rather than an individual. It was designed to make holding a home inside a corporate wrapper unattractive, and it works. For most buyers of a London home to live in, the practical conclusion is simple: do not buy through a company unless a tax adviser has shown you a reason that survives the ATED bill.

What is ATED and why does it exist?

Until 2013 it was common for high-value London homes, particularly those bought by overseas buyers, to be held through offshore companies. The house was never sold; the company that owned it was. That avoided stamp duty on later transfers and kept the owner’s name off the Land Register. The government’s answer was a package of measures: a punitive stamp duty rate on company purchases of homes, capital gains tax on disposals by the company, and an annual charge for the privilege of keeping the property inside the structure. ATED is the annual charge.

The word “enveloped” simply means owned through a wrapper. The tax applies to a dwelling, which is a house or flat and its garden and grounds, held by a company, a partnership with a corporate member, or a collective investment scheme. It does not matter whether the company is UK or overseas. Purpose-built student blocks, hotels, care homes, boarding schools and similar buildings are outside the definition.

Who has to pay it?

Any company that owns a UK dwelling valued above £500,000 on the relevant valuation date, unless a relief applies. The tax is charged per property, so a company holding three qualifying flats has three liabilities. It is charged for the chargeable period that runs from 1 April to 31 March, and it is payable in advance, at the start of the year, not at the end.

Individuals do not pay ATED. Neither do trusts holding property directly, although a trust that owns a company that owns a house is caught. The structure that most often surprises buyers is the overseas family company set up years ago for a different purpose, which now finds itself with a London flat on its books and a bill it did not expect.

How much is ATED in 2026/27?

The charge depends on the valuation band of the property. For the year from 1 April 2026 to 31 March 2027 the annual charges are, to the best of my knowledge:

• More than £500,000 up to £1 million: £4,600
• More than £1 million up to £2 million: £9,450
• More than £2 million up to £5 million: £32,200
• More than £5 million up to £10 million: £75,450
• More than £10 million up to £20 million: £151,450
• More than £20 million: £303,450

The bands rise each year with inflation. The steps between them are large, which is why the valuation matters. A property worth £1.9m and a property worth £2.1m are separated by a £22,750 annual difference.

How is the property valued?

The owner is responsible for valuing the property on an open-market basis, as a willing buyer and willing seller would agree it, and for revaluing every five years. The current fixed revaluation date for properties held at the time was 1 April 2022, and that value applies to the chargeable periods up to and including 2027/28. A property acquired after that date is valued at acquisition and then falls into the five-yearly cycle.

If a valuation sits within 10% of a band boundary, HMRC offers a pre-return banding check, which is worth using. A wrong band, discovered later, means penalties and interest as well as the difference in tax. In prime London, where values move and where a professional valuation can be argued either way near a threshold, a formal check is cheap insurance.

What reliefs are available?

ATED is meant to bite on homes occupied by their owners or by people connected to them. Property held for a genuine commercial purpose can usually claim relief, provided the conditions are met and a return is filed to claim it. The main categories are:

• Property let to unconnected third parties on a commercial basis
• Property held by a developer or trader as stock, for resale
• Property open to the public for at least 28 days a year
• Property held by a lender that has taken possession
• Farmhouses occupied by a working farmer
• Property held by a registered provider of social housing
• Property occupied by employees of a trading business, within limits

The first two are the ones that matter in London. A company that buys flats to let them to tenants at arm’s length will usually be relieved; a company that buys a house for the shareholder’s family to use will not, and if the property is occupied by a connected person even for part of the year the relief for that period is lost.

Relief is never automatic. A return has to be filed claiming it, every year, even where the result is a nil charge. Several properties under the same relief can be covered by one relief declaration return.

When and how is it paid?

For property already held, the return and the payment are due by 30 April at the start of each chargeable period. For a newly acquired property, the return and payment are due within 30 days of acquisition, or 90 days for a newly built dwelling. Filing is online through HMRC’s ATED service. Late returns and late payments attract penalties, and HMRC is not lenient about them.

Because ATED is paid in advance for the year ahead, a company buying a London property in, say, June inherits a bill almost immediately, on top of the higher stamp duty rate that applies to corporate purchasers of dwellings over £500,000.

Should a buyer use a company at all?

For a home you or your family will occupy, almost never. The 15% flat stamp duty rate on corporate purchases above £500,000, ATED every year, the loss of principal residence relief for capital gains, and, since 2017, the fact that a UK residential property held through an offshore company is inside the UK inheritance tax net anyway, together remove most of the reasons the structures existed.

For a genuine letting or development business, a company can still make sense, and ATED relief will usually be available. That is a decision for your tax adviser, made before you offer, with the full picture of your residence, your other assets and your plans for the property. I have seen buyers instruct their lawyers to set up a structure the week before exchange because a friend had one. It is expensive advice to take.

Rates and figures correct at the time of writing; confirm the current position before relying on them.

How Arbitrage can help

We buy for individuals, family offices and companies, and we treat the ownership structure as part of the purchase rather than an afterthought. We work alongside your tax advisers and solicitors from the start so that the question of how to hold a property is settled before you commit to it, and so that the acquisition costs, ATED included, are in the model before the offer goes in.

Frequently asked questions

Does ATED apply to a flat owned by an overseas company?

Yes, if the flat is a UK dwelling worth more than £500,000 and no relief applies. The location of the company is irrelevant. The charge is on the property, not on the owner’s residence.

Can I avoid ATED by letting the property?

If the property is let to unconnected tenants on commercial terms for the whole period, relief is generally available, but it must be claimed on an annual return. Any period of occupation by the shareholder or their family breaks the relief for that period.

Is it worth taking a property out of a company?

Often, but the exit has its own costs, including possible capital gains tax in the company and stamp duty on the transfer to the individual. The calculation depends on the base cost, the current value and how long the property will be held. Take advice before restructuring, not after.

What happens if I file the ATED return late?

Automatic penalties apply, increasing the longer the return is outstanding, plus interest on unpaid tax. HMRC applies these even where relief would have reduced the charge to nil, so the return itself matters as much as the payment.