Buying House with self contained annex

paulj2021

Hello, a house I’ve been looking at to purchase consists of a two bedroom house and a fully self contained one bedroom annex with separate entrance. The annex is not registered as a separate address as far as I know. Does anyone know if there are any tax implications of buying such a property, such as stamp duty etc? Will it count as two properties for council tax or whatever? Thanks

moneysavinghero

Who will be living in it? If it's a dependant relative (over 65 or disabled) then it will be exempt from council tax. If a non dependant family member lives in it then the council tax is reduced by 50%. If you would be renting it out then your tenants would have to pay full council tax.

Mickey666

If it's all on one title then there should be no SDLT implications.

AIUI an annexe is self-contained if it includes a kitchen and a bathroom.  Whether it connects internally to the main house doesn't seem to matter (based on my house+annexe).

I'm not sure if such an annexe MUST be separately registered for CT and a separate address but it certainly CAN be.  My house annexe has a separate address and CT band but the annexe of a near neighbour's house is not.  I believe mine does because a previous owner used to rent it out, though I don't understand the procedure, whereas the neighbour's annexe was only occupied by one of their parents.

There are CT discounts for annexes in which a dependent relative lives, up to 100%.

paulj2021

moneysavinghero said:

Who will be living in it? If it's a dependant relative (over 65 or disabled) then it will be exempt from council tax. If a non dependant family member lives in it then the council tax is reduced by 50%. If you would be renting it out then your tenants would have to pay full council tax.

The whole property would be my home as I need three bedrooms, this property seems right except for the split in two aspect, I don’t plan on having tenants, although later in life if I’m still there and on my own I might consider moving into just one part and renting the rest.

hazyjo

Perhaps something to consider, if you rent it out, they'll be tenants not lodgers. Thought it might be worth mentioning as we had a post recently from someone who thought he could have lodgers in an annexe.

CIS

moneysavinghero said:

Who will be living in it? If it's a dependant relative (over 65 or disabled) then it will be exempt from council tax. If a non dependant family member lives in it then the council tax is reduced by 50%. If you would be renting it out then your tenants would have to pay full council tax.

Only if it firstly has its own council tax banding and it's been banded under s3 of the Chargeable Dwellings Order 1992.

CIS

Mickey666 said:

If it's all on one title then there should be no SDLT implications.

AIUI an annexe is self-contained if it includes a kitchen and a bathroom.  Whether it connects internally to the main house doesn't seem to matter (based on my house+annexe).

I'm not sure if such an annexe MUST be separately registered for CT and a separate address but it certainly CAN be.  My house annexe has a separate address and CT band but the annexe of a near neighbour's house is not.  I believe mine does because a previous owner used to rent it out, though I don't understand the procedure, whereas the neighbour's annexe was only occupied by one of their parents.

There are CT discounts for annexes in which a dependent relative lives, up to 100%.

The annexe, if it is self-contained, almost certainly should be banded individually (even if used by family) - it's not the choice of the owner in it.

An annexe for council tax purposes is a specific type of property and is not directly the same rules as a dwelling for the purposes of the Class W exemption. For the Class W exemption and annexe reduction the dwelling however must have firstly been banded under the chargeable dwellings order as a self-contained dwelling.

Mickey666

CIS said:

Mickey666 said:

If it's all on one title then there should be no SDLT implications.

AIUI an annexe is self-contained if it includes a kitchen and a bathroom.  Whether it connects internally to the main house doesn't seem to matter (based on my house+annexe).

I'm not sure if such an annexe MUST be separately registered for CT and a separate address but it certainly CAN be.  My house annexe has a separate address and CT band but the annexe of a near neighbour's house is not.  I believe mine does because a previous owner used to rent it out, though I don't understand the procedure, whereas the neighbour's annexe was only occupied by one of their parents.

There are CT discounts for annexes in which a dependent relative lives, up to 100%.

The annexe, if it is self-contained, almost certainly should be banded individually (even if used by family) - it's not the choice of the owner in it.

An annexe for council tax purposes is a specific type of property and is not directly the same rules as a dwelling for the purposes of the Class W exemption. For the Class W exemption and annexe reduction the dwelling however must have firstly been banded under the chargeable dwellings order as a self-contained dwelling.

I've no doubt that's true, but how does the local council ever find out?  Is it a legal requirement for a householder to report that they have an annexe?

Also, what constitutes a 'self-contained annexe' in the first place?  I've read that it basically revolves around a kitchen, possibly because en-suites are so commonplace these days . . . but what defines a kitchen?  Somewhere to prepare and cook food I guess, but all that really needs is a sink and a microwave oven. 

So, if someone has a largish house with a 'utility room' (typically a room with taps and a sink), sitting room, bedroom with en-suite bathroom . . . then those rooms would not constitute a self contained annexe because there is no 'kitchen'.  But if a microwave oven was placed in the 'utility room' (or even a fixed cooker), what then?  Is it now a self contained annexe?

CIS

I've no doubt that's true, but how does the local council ever find out?  Is it a legal requirement for a householder to report that they have an annexe?

No but countered with that the ability to backdate council tax bandings and charges is always there in the background. The council usually find out from planning applications or where information otherwise makes it way to them.

I've read that it basically revolves around a kitchen, possibly because en-suites are so commonplace these days

A kitchen is not required, it's just a good indicator - self-contained does not actually require it to be fully self-contained. There is no direct definition of a self-contained in legislation as it's been left to case law to try and determine it.

Mickey666

CIS said:

I've no doubt that's true, but how does the local council ever find out?  Is it a legal requirement for a householder to report that they have an annexe?

No but countered with that the ability to backdate council tax bandings and charges is always there in the background. The council usually find out from planning applications or where information otherwise makes it way to them.

I've read that it basically revolves around a kitchen, possibly because en-suites are so commonplace these days

A kitchen is not required, it's just a good indicator - self-contained does not actually require it to be fully self-contained. There is no direct definition of a self-contained in legislation as it's been left to case law to try and determine it.

So all a bit of a mess then?  Does that mean that single room with a bed, sofa and microwave oven plus a shared bathroom could be 'self-contained' - ie a 'bedsit'?   Surely that could achieved by almost every house in the country.

And given the possibility of such an arrangement being defined as 'self-contained' along with the backdating risk, I guess you're suggesting that anyone with this sort of arrangement should be informing the council and asking for a formal assessment.  Or at the very least, putting some money aside in case of a backdated assessment?

eddddy

So you're saying that the property currently has two kitchens in total - one in the main house and one in the annex. If you require a mortgage, that may be a problem (unless the two kitchens are for religious reasons).


If you google something like two kitchens mortgage you'll find many stories of people having problems getting mortgages - plus some mortgage brokers who say they can find suitable lenders. (But I'm guessing these might be sub-prime lenders who charge more than the high street lenders.)

Maybe speak to some mortgage brokers with experience of getting loans for 2 kitchen properties and/or discuss with your prospective lender, before potentially wasting mortgage application fees and your time.