The Government has introduced a plethora of measures since 2013 to discourage high value UK residential properties from being held indirectly, e.g. through a company, in order to minimise or avoid tax.

As of 1 April 2016, the lower valuation limit fell to £500,000, meaning more residential homes held in companies or partnerships will be subject to higher taxation.

Annual Tax on Enveloped Dwellings (ATED) applies at a fixed amount depending on the following values:

Property value ATED 2016-17
£500,000 – £1m £3,500
£1m – £2m £7,000
£2m – £5m £23,350
£5m – £10m £54,450
£10m – £20m £109,050
£20m+ £218,200

Properties caught by ATED will also be subject to a revised valuation every five years to ensure payments reflect rising property prices.

Investors also face new taxes, including:

SDLT – Payable at 15 per cent on the acquisition of properties costing more than £500,000
Capital Gains Tax (CGT) – Payable at 28 per cent on a proportion of gains for the period that the property has been subject to ATED
ATED Relief

ATED rules do not apply to property rental businesses, residential developers, care homes, student accommodation, hospitals and farmhouses.

In order to claim exemption, the owner must submit a ‘relief declaration return’ each year stating what relief is being claimed. Failure to make an exemption return could result in a penalty from HMRC.

For more information on how the changes may affect you, then contact your local Champion office.