Annexe change of use and business rates/ council tax

[Charlene214]

Hello. We would really like to air bnb our annexe. It was built in the 90s as a 1 bedroom, 1 living area,  kitchen and bathroom.  Own front entrance and interconnecting door with main house in coridoor on first floor. Building permission stated it could not be rented out. When we moved in, we removed the kitchen and turned into an office/ utility area, to avoid paying 2 council tax bands. We are considering reinstalling kitchen, to air bnb. We have contacted planning consultant to apply to council for change of use. Has anyone else had any experience in this area? What was your outcome? We are also unsure if we could rent it under the rent a room relief and pay council tax, or go via business rates route, again does anyone have any experience or advice? Sorry for long question.  Many Thanks 

[Mike-And-Jane0]

@Charlene214 I hope your consultant has told you that you don't need planning permission to rent a room but said 'room' does need to be accessible from the house (not sure if you need to actually access it this way or if door can be kept locked). If you go for planning and a business rate approach you won't pay any rates BUT you will pay capital gains tax when you sell. Finally if rent a room you get first 7k (?) free of tax. If you go Furnished Holiday Let then you can allocate the rent between owners any way you like so could benefit from 12.5K tax free.

[Paula1787]

@Charlene214 Hello, I hope you don’t mind me asking you a question but you seem knowledgeable? I’m thinking of becoming a host and renting out our converted garage/ garden annexe. It has a shower room but no kitchen. Just a kettle, toaster and fridge. Does this require me to pay council tax? I’m concerned that if So , and it doesn’t rent out very often, I’ll be left with a big council tax bill every month! The garage was already converted when we bought the house, we just added a shower room. I’d be grateful for any info you have. Thank you so much. Paula Graham. 

[Charlene214]

Hi Paula, I believe a kitchen is classed as something where you could cook and prepare food, so it is a bit of a gray area. It might be worth checking with your council just to make sure. All the best

[Elaine1033]

Hi Charlene!

Well, this is one we've faced!

Our "annexe" which was previously a games come junk room  with a loo, hand basin and shower was tidied up and we decided to airbnb it.

Tentatively we listed it and thought it ideal as on ground floor and looked a handy base for walkers etc. 

A few months in and we've been slapped with a revaluation of the annexe which now has it's own council tax band - A.

We're also having to pay right back from September last year ontop of the rate for this year, resulting in an extra £1400 and some pounds plus the £768 the council says is owed from last September despite in September we had our 1st guest on the 29th  - no clemency has been shown! 

Our payments each month just on the annexe are £245. The house is £1650  for the year, so with £1400 for the annexe, our annual bill is in excess of £3k.... for a two bed end of terrace!!!

Anyway, where we are is very beautiful and we've decided to make lemonade with the lemons we've been thrown BECAUSE  the annexe council tax will come off our costings and should we sell in the future, as it is recognised by the council it has actually  increased the market price of the property by around 25% !

We're not going to apply for business rates because we don't want to get clobbered when we sell.

Our vindictive neighbour  unintentionally did us a good turn by "anonymously" reporting our airbnb'd room. Thanks much!

We were absolutely unaware that we needed to pay extra council tax, so am glad it happened when it did as we could have faced owing alot more in time to come.

As it I'd, the room is paying for itself at the moment and we're getting a little bit of extra income as was the idea  when we started due to work drying up in the area for my husband in the construction industry - he drives machines and periodic work is available, but nothing much long term.

Oh, I forgot to add...

We have a microwave, kettle and a water dispenser, mini fridge and a posh bin in the room along with 2 single beds.

Hope this helps to allay any concerns for you, as it's ok for us at the moment .

If it didn't work out, we'd investigate removing the "independent " status and keep our kitchen door open so it returned to being just part of the downstairs area or even a dining room.

Take care and enjoy your venture if you do go ahead.

[Mike-And-Jane0]

@Elaine1033 why would 'We're not going to apply for business rates because we don't want to get clobbered when we sell.' cause you to be clobbered when you sell? Will Capital Gains Tax not be payable on this 'second' property anyway?

Also what is the access route to the. annexe? If you can access through the house it may well be eligible for the rent a room scheme.