Originally introduced to discourage the ‘enveloping’ of residential properties within corporate structures for tax mitigation, ATED has undergone several changes since its inception.
Revaluation and Chargeable Amounts
Properties subject to ATED are revalued every five years, with the most recent valuation date being 1 April 2022. This valuation applies to chargeable periods from 1 April 2023 to 31 March 2028. The amount payable is determined based on the property’s value, segmented into bands. For the chargeable period from 1 April 2025 to 31 March 2026, the annual charges are as follows:
| Property Value | Annual Charge |
| £500,001 to £1 million | £4,450 |
| £1,000,001 to £2 million | £9,150 |
| £2,000,001 to £5 million | £31,050 |
| £5,000,001 to £10 million | £72,700 |
| £10,000,001 to £20 million | £145,950 |
| Over £20 million | £292,350 |
Adjustments for Inflation
The annual chargeable amounts are adjusted in line with the Consumer Price Index (CPI). For instance, the charges for the 2024-2025 period increased by 6.7%, reflecting the September 2023 CPI. This adjustment mechanism ensures that the tax remains aligned with economic conditions.
Alternative Finance Arrangements
In the Autumn Budget 2024, the government announced changes to the ATED rules concerning alternative finance arrangements. Currently on its second reading in the House of Lords, these changes aim to create a level playing field between alternative finance methods, such as diminishing shared ownership arrangements, and conventional financing like traditional mortgages. Proposed to be effective from 30 October 2024, the key changes include:
- Tax Neutrality: Individuals and companies using qualifying alternative finance will no longer be subject to capital gains tax, corporation tax, or income tax charges where the same charges would not apply to those using conventional financing arrangements.
- ATED Exemption: Alternative finance used to purchase residential properties will not be subject to ATED in situations where a comparable conventional financing arrangement would not be liable.
Implications for Property Owners
Property owners utilising alternative finance arrangements, particularly those adhering to religious beliefs prohibiting the receipt and payment of interest (such as the Islamic faith), will benefit from these changes. The adjustments ensure that such financing methods are not disadvantaged compared to traditional mortgages, promoting inclusivity within the financial system.
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