Market Insight

April tax changes to impact residential property-owning businesses

March 26, 2018
Vail Williams - business rates and services

Businesses that own high-value residential properties (£500,000 and over) could be hit with tax increases when changes to the way the Annual Tax on Enveloped Dwellings (ATED) is calculated take effect.

Companies owning high-value residential property have had to file an Annual Tax on Enveloped Dwellings return (ATED) since 2012.

Previously, if an ATED charge was payable on a property, it was calculated on the property’s value at 1 April 2012.

However, from April 2018, the tax will become payable based on the property’s value at 1 April 2017.

What are the charges?

The ATED annual charges for the period 1 April 2018 to 31 March 2019 will be:

Property value at 1 April 2017 Annual charge
£500,000 – £1m £3,600
£1m – £2m £7,250
£2m – £5m £24,250
£5m – £10m £56,550
£10m – £20m £113,400
More than £20m £226,950
How could this impact your business?

Given the movements in the UK residential property market over the last five years, businesses could find that their properties have increased in value, taking them into a higher valuation banding.

This could potentially double the ATED payable, especially for those properties valued at the lower end of the scale, where it is more likely that they’ve increased in value since 2012.

On a more “positive” note for businesses owning assets in the super-prime market, where property valuations have fallen, properties valued at more than £20m could see their tax bill half if the valuation at 1 April 2017 takes them down into the £10m-£20m valuation bracket.

What do you need to do?

Given that 18/19 ATED returns need to be filed, along with any exemptions, by 30 April 2018, it’s important for company directors to act now to ensure that calculations are being made based on the value of their property at 1 April 2017.

This is particularly important if a property value is expected to be close to the top or bottom of a valuation band, because the resulting difference in tax liability could be significant.

For expert ATED advice or help in completing a revaluation of your property / portfolio, don’t hesitate to get in touch with our property valuation team.

For more information on ATED, visit the HMRC website.