The Autumn Statement on 22 November 2023 saw the announcement of the new Annual Tax on Enveloped Dwellings ("ATED") charges which will apply for the next ATED year (from 1 April 2024 to 31 March 2025).

For those who are new to ATED, a summary of the tax and how it applies can be found here: 10 Years of ATED – A brief retrospective and notes for the future (burges-salmon.com).

The amount due on chargeable properties in each ATED band increases each year in line with the previous September’s consumer price index (CPI).

As the September 2023 CPI was 6.7% this means that the chargeable amounts for each band will be increasing by this amount and the new rates, which apply from 1 April 2024, are as follows:

It is worth reflecting on the impact that recent inflation levels are having on ATED. Between the 2015 and 2016 ATED years the % increase was zero. The September 2015 CPI was actually -0.1%, but, perhaps unsurprisingly, the ATED legislation only allows for an increase (not a decrease) of the annual charges.

In the seven ATED years prior to 2023 the average annual increase of the chargeable amounts was just under 1.6%, so the annual charge has gone up very little historically (the exception was the 2015/16 ATED year when, on-top of the inflationary increase, the chargeable amounts also increased by 50% compared with the 2014/15 figures). The impact of the inflationary increase became much more pronounced in 2023 when the amounts increased by 10.1% and, as set out above, next year they are set to increase by a further 6.7% meaning an average increase of 8.35% each year over the last 2 years.

Whilst historically the increase in the ATED charge has been gradual, in a high inflation environment the pace is much more accelerated. This is to say nothing of the “stealth tax” element of ATED, whereby the ATED band values remain fixed with properties being re-valued at least every five years (the last valuation date of 1 April 2022 applies until 31 March 2027). This means that as time goes on (assuming residential property values continue to rise) more and more properties will enter higher bands triggering greater ATED charges which themselves increase annually in line with inflation.

As a result, it may be worth considering (sooner rather than later) whether it's better to “de-envelope” properties to avoid the charge in the future.

What you need to pay The amount you’ll need to pay is worked out using a banding system based on the value of your property. Chargeable amounts for 1 April 2024 to 31 March 2025 Property value Annual charge More than £500,000 up to £1 million £4,400 More than £1 million up to £2 million £9,000 More than £2 million up to £5 million £30,550 More than £5 million up to £10 million £71,500 More than £10 million up to £20 million £143,550 More than £20 million £287,500

https://www.gov.uk/guidance/annual-tax-on-enveloped-dwellings-the-basics