Annual Tax on Enveloped Dwellings: out of time claims to relief
Published 26 November 2025
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Who is likely to be affected
Companies, collective investment schemes and partnerships with company members (collectively referred to as non-natural persons (NNPs)) owning UK residential property valued over £500,000.
General description of the measure
Annual Tax on Enveloped Dwellings (ATED) is an annual charge on dwellings owned by companies (known as ‘enveloping’), its aim being to discourage uncommercial enveloping. Relief can be claimed for dwellings used for commercial purposes, for example in a property business.
This measure updates the legislation to ensure that relief is available to NNPs owning residential property for commercial purposes.
Policy objective
In line with the policy intent, this measure ensures that relief from ATED is available to those companies holding property for commercial purposes. Late returns remain subject to robust late filing penalties.
Background to the measure
This measure was announced at Budget 2025.
Detailed proposal
Operative date
The measure will come into force on the date of Royal Assent to Finance Bill 2025-26 and has effect as if it had always been in force.
The measure applies UK-wide.
Current law
The current law relating to ATED is contained in Part 3 Finance Act (FA) 2013 at Sections 94 to 174 and Schedules 33 to 35.
Section 106 deals with situations where the amount of tax chargeable is either higher or lower than the initial amount of tax chargeable. The initial amount of tax chargeable is the amount due under Section 99. Section 106(1) deals with situations where the adjusted chargeable amount is greater than the initial amount of tax chargeable, meaning more tax is due, and sections 106(3) to (8) deal with situations where the adjusted chargeable amount is less than the initial amount of tax chargeable, meaning less tax is due.
In any case where a claim to relief is made under section 106(3) because the adjusted chargeable amount is less than the initial amount chargeable, section 106(5) provides that the relief must be claimed in an ATED return, or by an amendment to an ATED return. Section 106(6) provides that the claim to relief must be delivered by the end of the chargeable period following the one to which the claim relates (that is within 12 months of the end of the chargeable period which the claim relates to).
Proposed revisions
Legislation will be introduced in Finance Bill 2025-26 to remove the time limit in section 106(6) of Part 3 FA 2013, the effect being that claims to relief made in an ATED return can be made without time limit. The time limit within which to amend an ATED return (a way in which a claim can be made) set out in paragraph 3 of Schedule 33 FA 2013 will still apply. Penalties will continue to apply to ATED returns not delivered by the filing deadline.
Summary of impacts
Exchequer impact (£ million)
| 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 | 2030 to 2031 |
|---|---|---|---|---|---|
| Nil | Nil | Nil | Nil | Nil | Nil |
This measure is not expected to have an Exchequer impact.
Macroeconomic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
The measure is not expected to have any direct impact on individuals as ATED and the availability of ATED relief only applies to companies, collective investment schemes and partnerships with company members.
This measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
This measure only affects businesses, therefore it is not anticipated that there will be disproportionate impacts on those in groups sharing protected characteristics.
Administrative impact on business including civil society organisations
There are expected to be no impacts for businesses as the amendment ensures that the policy works as originally intended.
The measure is not expected to impact civil society organisations.
Operational impact (£ million) (HMRC or other)
It is not expected that there will be any operational costs in implementing this measure.
The measure will not require any changes to HMRC’s systems and processes.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be monitored through customer engagement and from information collected in returns.
Further advice
If you have any questions about this change, contact the HMRC Stamp Taxes team by email stamptaxes.budgetfinancebill@hmrc.gov.uk.