More than 2,400 homes have claimed a council tax discount for having a self-contained annexe or 'granny flat'. But the Government believes more people are entitled to the discount.

Last year the Government scrapped what it called the "unfair surcharge" on family annexes, which saw two separate council tax bills levied on the same home if it had a 'granny flat' or similar extension.

The homes were essentially treated as having two separate addresses and two separate council tax bills were either sent to the main household, or one bill was sent to the main household and one to the relative living in the annexe.

See's Council Tax Bands guide to see if you could lower your band and save 1,000s.

But now the main house is subject to council tax as normal, while the council tax bill for the annexe is halved as long as it is "in use". This means either a relative/s living in it or it being used by the main property owner.

As an example, if your relative lives in your annexe and receives a council tax bill, they'll get the 50% discount, while you'll pay your full council tax bill as normal. If the original homeowner receives two separate council tax bills for the property and the annexe, they'll get a 50% discount on the annexe part of the council tax bill only.

Since the scheme launched on 1 April 2014, more than 2,400 homes have benefited from the discount saving around 1.3 million on council tax bills across the UK, according to the Department for Communities and Local Government (DCLG).

But the Government believes many more people may be eligible for the discount and it is urging town halls to be more open with residents about who can claim the benefit, as well as encouraging those who think they may be entitled to apply.

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'Granny annexe' bill payers can get a council tax discount

I have a 'granny annexe', am I eligible?

In order to qualify for the council tax discount you must meet the following criteria:

  • You live in England. The council tax discount only applies to eligible homes in England as council tax is a devolved matter in Scotland, Wales and Northern Ireland.

  • The annexe is a "distinct area". The annexe must have been adapted into a separate living area. To check whether your annexe has been banded as a "distinct area" and given its own council tax band, you'll need to contact your local Valuation Office for Council Tax. Once it's confirmed this you'll need to let your local council/authority know as it is responsible for billing.

  • The annexe must be "in use". Someone doesn't actually have to live in the annexe to qualify for the discount, it's enough that the homeowner uses the separate living space. But if someone does live there, it must be a family member. Where a non-family member occupies an annexe, the discount will not apply.

  • Any family member/s can live in the annexe. It doesn't need to be an elderly relative living in the annexe, it can be any non-dependent family member/s. There's no restriction on how many people can live in the annexe to qualify.

  • The relative living in the annexe cannot be a dependent. This means the relative/s living in the annexe must not be dependent on a carer or require any special assistance.
Martin Lewis
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How do I apply for the discount?

Once you've checked you qualify for the discount, you'll need to contact your local authority to tell it.

Even if you already receive a single person or other council tax discount, you can still apply for this granny annexe discount on top.

Can I reclaim council tax overpaid last year?

If you've only just realised you qualify for the discount, as well as applying for it going forward, you should also contact your local authority to reclaim the council tax you may have overpaid since 1 April 2014 when the scheme launched.

The DCLG says local authorities "have to give your money back".

'We want to help extended families stay together'

Local Government Minister Kris Hopkins says: "It is only right we help hard-working families by giving people the choice to live with extended family without having to pay the price twice through double taxation in their Council Tax bills.

"Councils must pass this discount on to those who are rightly entitled to it. By cutting these taxes on family annexes we are sending a strong message that we want to help extended families stay together.

"We have been working to give people greater financial security by keeping household costs down through our five-year Council Tax freeze which has saved the average band D household 1,075 since 2010, compared to a period between 1997 and 2010 when bills doubled."

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