Buying house with second property on site

jojo_1982

We have seen a house we like but at some point a detached outbuilding has been converted into an Airbnb and has its own council tax band. With the premium on second homes and holiday lets, the council tax means you’d never be able to make money from it (which I suspect is part of the reason owners are now selling) and we have no interest in running an Airbnb anyway, but obviously don’t want to pay a huge amount of council tax for this unoccupied ‘cottage’ in the garden.
Is there anything we could do to make it no longer be classed as a separate dwelling? What if we removed the kitchen? I wouldn’t want to demolish the annexe completely as the space would be useful as a gym or playbarn.
Thanks

lincroft1710

Removing the kitchen may be the answer, only the Valuation Office Agency would know for definite, but you would be unlikely to get an opinion from them until you've done the work. There is a possibility that the band of the main house could increase

jojo_1982

This is what worries me, ripping out a new kitchen and it not even making any difference would be really annoying. Especially as it has both a new kitchen and bathroom in the annexe (while the main house need everything doing to it). 
The main house is already quite a high band and I would have thought a valuation of a property with a self contained annexe would then go down in value if you remove the self contained annexe bit so I'd be surprised if it went up but I suppose it's a possibility

SDLT_Geek

jojo_1982 said:

We have seen a house we like but at some point a detached outbuilding has been converted into an Airbnb and has its own council tax band. With the premium on second homes and holiday lets, the council tax means you’d never be able to make money from it (which I suspect is part of the reason owners are now selling) and we have no interest in running an Airbnb anyway, but obviously don’t want to pay a huge amount of council tax for this unoccupied ‘cottage’ in the garden.
Is there anything we could do to make it no longer be classed as a separate dwelling? What if we removed the kitchen? I wouldn’t want to demolish the annexe completely as the space would be useful as a gym or playbarn.
Thanks

If the property is in England, then you need to consider the stamp duty land tax implications if, at completion of the purchase, you will be buying two "dwellings".  It could mean that the extra 5% SDLT applies, but there are rules about "subsidiary dwellings" which might help you.

born_again

Would it be possible to sell this 2nd property off?

Grumpy_chap

jojo_1982 said:

The main house is already quite a high band and I would have thought a valuation of a property with a self contained annexe would then go down in value if you remove the self contained annexe bit so I'd be surprised if it went up but I suppose it's a possibility

You may be conflating property sale value and CT value.

Buy a plot of land "property" with a main house plus an annex (separate dwelling) and pay £X.
Buy the same plot of land "property" with a main house plus an outbuilding housing gym, probably pay smaller £x.

Plot of land is assessed for CT as two dwellings, each paying their own CT bill.  Main house, say, band E plus annex, say, band A.
Change the plot of land so it is only assessed as one dwelling, and only one CT bill.  The main house increases a band to, say, band F, but there is no longer an additional CT charge for the annex.  The Council overall receives less income.

gwynlas

If the annex is completely self contained and you do  not want to run it as airbnb why not ask the EA how much it would rent for in local market? Tenants would be responsible for their own bills and  you would make some income

jojo_1982

SDLT_Geek said:

jojo_1982 said:

We have seen a house we like but at some point a detached outbuilding has been converted into an Airbnb and has its own council tax band. With the premium on second homes and holiday lets, the council tax means you’d never be able to make money from it (which I suspect is part of the reason owners are now selling) and we have no interest in running an Airbnb anyway, but obviously don’t want to pay a huge amount of council tax for this unoccupied ‘cottage’ in the garden.
Is there anything we could do to make it no longer be classed as a separate dwelling? What if we removed the kitchen? I wouldn’t want to demolish the annexe completely as the space would be useful as a gym or playbarn.
Thanks

If the property is in England, then you need to consider the stamp duty land tax implications if, at completion of the purchase, you will be buying two "dwellings".  It could mean that the extra 5% SDLT applies, but there are rules about "subsidiary dwellings" which might help you.

It is in Wales so rules are similar in terms of there being a 5% higher rate, and there would definitely be more LTT to pay. However I'm not sure if the extra applies to only the 2nd dwelling. The Government website for calculating LTT on multiple dwellings calculates it as the higher rate for both dwellings but I would have thought it should be normal rate for the 1st and higher rate for only the second.

jojo_1982

We have thought about the possibility of selling it off or renting out, but really we need the extra space that the outbuilding would provide. We just don't want to use it as a self contained property.
Additionally, it would mean we'd have a shared driveway, limited parking, them going through our land to access their house, less privacy etc. I don't think it's something we'd want to do

user1977

How are you funding the purchase? Mortgage lenders tend not to like complications such as a second property or annexe.

jojo_1982

Grumpy_chap said:

jojo_1982 said:

The main house is already quite a high band and I would have thought a valuation of a property with a self contained annexe would then go down in value if you remove the self contained annexe bit so I'd be surprised if it went up but I suppose it's a possibility

You may be conflating property sale value and CT value.

Buy a plot of land "property" with a main house plus an annex (separate dwelling) and pay £X.
Buy the same plot of land "property" with a main house plus an outbuilding housing gym, probably pay smaller £x.

Plot of land is assessed for CT as two dwellings, each paying their own CT bill.  Main house, say, band E plus annex, say, band A.
Change the plot of land so it is only assessed as one dwelling, and only one CT bill.  The main house increases a band to, say, band F, but there is no longer an additional CT charge for the annex.  The Council overall receives less income.

I think I am getting myself confused by this. I was under the impression that council tax value was based on saleable value though (albeit not recent value), but I guess it's more complicated than that. The main property is band G already and the council tax charge increases very steeply above this band.