When is an annexe a separate dwelling?

Annexes are separate living spaces that are connected to but separate from the main property. Sometimes called ‘granny annexes’ or ‘Wendy houses,’ an annexe can be a separate building, a converted garage or shed, or built within a house, such as in the basement or attic.

A recent study revealed that around 10,000 people apply for permission to build annexes in the UK every year. Annexes are often built to house elderly parents or other family members who need live-in support or for renting out for short holiday lets.

Some annexes are charged additional Council Tax, while others are exempt or given a reduced rate. There is also a Stamp Duty relief known as the Multiple Dwellings Relief that applies to some properties with an annexe that is considered a separate dwelling.

We are going to explore the ins and outs of annexes, find out when an annexe is classed as a separate dwelling, what tax reliefs are available, and how you can claim them.

What is an annexe?

An annexe is a building that is separate from but either joined to or associated with another main building. An annexe may be a simple room used as a storage space or a self-contained unit with enough facilities for someone to live in.

Certain requirements determine whether or not an annexe is considered a separate dwelling. The classification of your property can lead to tax reliefs and discounts.

So let’s find out when an annexe is considered a separate dwelling.

When is an annexe a separate dwelling?

An annexe is usually not considered a separate dwelling, even if it is detached from the main property. This is because it either does not have the necessary amenities to be classed as a dwelling, or it is used as additional accommodation for dependent relatives or children under the age of 18.

For an annexe to qualify as a separate dwelling, it must be either:

  • used as a dwelling
  • suitable to be used as a dwelling
  • in the process of being adapted or constructed for use as a dwelling.

So what are the factors that determine whether a space is a dwelling?

Well, a dwelling must have the facilities to provide basic living necessities. This includes facilities for maintaining hygiene, cooking and consuming food and drink, storing personal belongings, and an adequate place to sleep.

Therefore, for a self-contained annexe to qualify as a dwelling, it must have the following:

  • space for a bed
  • space for storage
  • a kitchen
  • a bathroom
  • privacy and security from the main property
  • a separate entrance to the main home. This might be an external door or a door from within the main home.

These are the minimum requirements for a self-contained annexe to be considered a dwelling. However, there may be some discrepancies, such as several self-contained dwellings sharing a kitchen.

There may be further evidence that a self-contained annexe can be considered a separate dwelling. For example:

  • it has a separate utility supply
  • it has a separate postal address
  • it has a separate Council Tax license
  • if the annexe could be sold separately from the main property
  • the annexe has historically been occupied

What’s the difference between an annexe and an extension?

The primary difference between an annexe and an extension is the usage of the space. An extension is a continuation of the main property, such as to make space for an extra bathroom or a bigger kitchen. An annexe is an additional space independent of the main property, even though it may still be connected.

What’s the difference between an attached annexe and a detached annexe?

An attached annexe is an annexe that is either built within or directly connected to the main property. For example, an attached annexe could be built in a loft, basement, or garage connected to the home.

A detached annexe is an annexe that is built separately from the main property. For example, a detached garage could be built at the end of the garden or in a garage that is not connected to the home.

Do you need planning permission to build an annexe?

You will likely need planning permission to build an annexe. If you are building an annexe in your garden, you will need to apply for planning permission from your local council. Even if you are converting a loft into an annexe, you still need to apply for planning permission.

Whether you ultimately need planning permission or not, you should still contact your local authority before building an annexe to ensure you can do the work you want and to clarify whether or not you need the council’s or your neighbours’ permission.

Do you have to pay Council Tax on an annexe?

The rules around annexes and Council Tax can be a bit confusing as they change a lot depending on the specifics of your situation.

A self-contained annexe that is a separate dwelling should usually have its own Council Tax assessment and bill.

However, if your annexe is being occupied and used as a self-contained dwelling, it will likely qualify for some Council Tax relief. If it is not being occupied, you must prove it is suitable for use as a dwelling.

So let’s take a look at some of the situations that can lead to an exemption or reduction in Council Tax.

A dependent relative lives in the dwelling

Your annexe is exempt if it is banded separately for Council Tax but is still part of the main property if a dependent relative is living in it as their main residence.

A relative is considered dependent if any of the following apply to them:

  • they are over the age of 65
  • they are substantially or permanently disabled
  • they are severely mentally impaired.

If you live in an annexe attached and are a non-dependent relative of the person responsible for paying Council Tax on the main property, you may be eligible for a 50% discount on your Council Tax bill.

To claim this discount, the annexe must fulfil all the following criteria:

  • it must form part of a single property
  • it must be occupied by a relative of the person who is responsible for paying Council Tax on the main property
  • it must be the main home of the person living in it.

If you think you are eligible to claim this discount, you should contact your local council and inform them of your situation.

The annexe can’t be let separately

Your annexe will also be exempt from paying separate Council Tax if it cannot be let separately from the main property. For the exemption to come into effect, the following must all apply:

  • the annexe is unoccupied (it is not used as a dwelling)
  • it forms part of a single property (connected to the main property) and can’t be let separately.

You may also be eligible for a 50% Council Tax discount for your annexe if both of the following apply:

  • the annexe forms part of a single property
  • the annexe is used as part of the main home by the person responsible for paying Council Tax.

The annexe is occupied by students or people under 18

If the annexe is a separate dwelling but is only occupied by full-time students or people under 18, you don’t have to pay additional Council Tax for the annexe.

This is because full-time students and children under 18 are exempt from paying Council Tax and are disregarded in household head counts.

What are the benefits of building an annexe?

Building an annexe will cost you a fair bit. A detached annexe is likely to cost in the region of £20,000 to £60,000, while an attached annexe is more likely to cost between £15,000 and £40,000.

However, there are also many benefits that come with adding an annexe to your property.

For example, building an annexe could:

  • add value to your main property
  • create more living space in your home without you needing to move
  • create additional accommodation for relatives to live in
  • provide you with additional accommodation that can be used as a holiday rental to generate income

Does an annexe qualify for Multiple Dwellings Relief?

Multiple Dwellings Relief (MDR) is a reduction in the Stamp Duty Land Tax (SDLT) rate paid when you purchase a property. MDR can be applied if more than one dwelling is bought in a single property purchase.

To qualify for MDR, the annexe attached to your property must be classed as a separate dwelling.

Summary

An annexe is classed as a separate dwelling when it has the facilities necessary to be used as a self-contained living space. This includes a bathroom, a kitchen, space for a bed, and storage space. Depending on your situation, having your annexe classed as a separate dwelling can lead to tax reductions and reliefs.

If you think your annexe could qualify for reliefs or if you are considering building an annexe, contact your local council to find out more and to get advice on your specific situation.