Is a granny annexe subject to council tax?

The Valuation Office Agency decides the first question, and it looks at what the annexe was built or adapted to do, not at how the family happens to use it today. A finished annexe with its own kitchen, bathroom and somewhere to sleep counts as separate living accommodation and gets its own band, even if it is currently used as a study or a guest room rather than lived in full time. How an annexe gets its own council tax band below covers that test in full.

The second question, who lives there, is where most of the money is either saved or lost. A dependent parent moving in can remove the bill entirely. A grown-up child or another relative moving in, or the household using the annexe as extra space rather than letting anyone live in it separately, still halves it. Only a stranger renting the annexe, or nobody living there with no planning restriction stopping that, leaves the full charge in place.

If you are still weighing up whether to build one, how much it would cost to build a granny annexe and the complete guide to granny annexes cover the decisions that come before this one.

If an annexe has all three, the Valuation Office will normally band it separately. It makes no difference that it shares a boiler, a water supply or a single meter with the main house, that it could not be sold on its own, or that the family currently uses it as a study rather than somewhere to live. Built or adapted for separate living accommodation is what decides it, not how it happens to be used this month.

Nobody applies for a band the way you would apply for a discount. In practice a band gets assigned when the council notices the annexe, most often because a builder submits building control paperwork or because you tell the council yourselves once the annexe is finished. Telling the council straight away is worth doing anyway, because a discount or exemption is not usually backdated much beyond the date you reported it, so a late report can cost more than the annexe was ever going to save. If you think an annexe, or the main house, has been given the wrong band altogether, gov.uk's band checker lets you look it up and challenge it, with evidence, free of charge.

Whether the annexe needs planning permission before you can build it at all is a separate question, decided by its size and how self-contained it will be. Do you need planning permission for a granny annexe covers that in full, and it is worth reading before a design is finalised, since the test that creates a council tax band is close to the one that decides whether permission is needed to build.

Relative is defined broadly for both the discount and the exemption: a spouse or civil partner, a parent, grandparent, child or grandchild, a brother or sister, and further relations such as an aunt, uncle, niece or nephew, along with the equivalent for an unmarried couple. Where the confusion usually starts is between the 50% discount, which applies to almost any relative living in the annexe as their main home, and the full exemption, which only applies once that relative also meets the dependent relative test on age, mental impairment or disability. A daughter in her thirties living in the annexe qualifies the household for the 50% discount. Her mother moving in a few years later, once she is 65, moves the same annexe from a discount to a full exemption, without anything about the building itself changing.

If a planning condition or a legal agreement stops the annexe being let or occupied separately from the main house, an empty annexe is exempt under Class T for as long as it stays empty and the restriction stands. This is common. Many councils only grant planning permission for an annexe on the condition that it is used by a family member and never sold or let independently, and that condition is exactly what qualifies it for the exemption while nobody is living there.

The practical answer for most families is not to let the annexe sit empty for long. If nobody is ready to move in yet, ask the council in writing what the annexe's status is and whether a planning condition applies to it, rather than assuming it is covered.

1. 1

   Tell the council once the annexe is occupied or finished

   Before the first bill

   Most councils have an online form for reporting a new self-contained annexe or a change of circumstances. Do this as soon as it happens, since a discount or exemption is usually only backdated to the date you reported it, not to when it started.
2. 2

   Send evidence for the discount or exemption you are claiming

   With the application

   Proof of the family relationship for a 50% discount or a Class W exemption, and for severe mental impairment, a doctor's certificate confirming the diagnosis and when it began. For an empty annexe, a copy of the planning condition that stops it being let separately.
3. 3

   Report any change within 21 days

   Ongoing

   A discount or exemption follows the person living in the annexe, not the annexe itself. If your parent moves into a care home, a different relative moves in, or the annexe is let out, the law gives you 21 days to tell the council. Missing that deadline can mean a fixed penalty on top of the tax owed, on top of the council tax itself once the discount or exemption no longer applies.
4. 4

   Ask the council to review a refusal, or challenge the band itself

   If it goes wrong

   You can ask your council to look again at a discount or exemption decision, and appeal to the free Valuation Tribunal for England if you still disagree. A band you think is wrong is challenged with the Valuation Office rather than the council, and gov.uk's band checker is the place to start.

If you are weighing up building an annexe against buying a house that already has one, do granny annexes add value and finding a house with an annexe for sale cover the two routes families take before council tax ever comes into the decision.