Granny in the Annex

by Readers Question

14:30 PM, 29th April 2014
About 6 years ago

Granny in the Annex

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Granny in the Annex

Dear Readers,

I am looking to convert my double detached garage into a annex for the purpose of renting for approx £600 PCM, the cost for conversion would be approx £20,000 which I am looking to pay for with savings.

I have a mortgage of approx £100,000 on the main residence. My question is would my best option be to rent the Annex under the rent a room scheme or would I be able to rent the annex & claim back any tax due against the interest which is paid on the mortgage for the main residence?

Thanks StephanieGranny annex



Comments

Neil Patterson

14:33 PM, 29th April 2014
About 6 years ago

Hi Stephanie,

My understanding is you normally have to take new borrowings out to claim tax relief for interest on your main residence, but this is an interesting question and I am not sure how you would be best to structure it.

Mark Alexander

14:46 PM, 29th April 2014
About 6 years ago

Hi Stephanie

This could be an interesting thread.

I have an annexe on my home and because it's self contained (kitchen, lounge and en-suite bedroom) it is rated separately for Council Tax purposes. As it's not lived in I get the vacant annexe exemption.

I don't know the answer to your question but I do wonder whether an annexe, which may be rated as a separate dwelling, would qualify for the rent a room scheme.

Industry Observer

15:35 PM, 29th April 2014
About 6 years ago

What vacant annexe exemption or do you mean you used to get it Mark?

I thought all discounts etc had devolved to LA discretion April 2013 and all had perished bar the single adult occupier allowance and exempted status such as students (and nuns!!)?

Mark Alexander

15:42 PM, 29th April 2014
About 6 years ago

Reply to the comment left by "Industry Observer " at "29/04/2014 - 15:35":

Breckland Coucil still operate vacant annexe exemption.
.

Industry Observer

15:45 PM, 29th April 2014
About 6 years ago

I dare say they do Mark just as Swansea still allows 100% discount for a year on a full refurbishment of an otherwise empty home.

And Cardiff still allow a bit of discount between voids.

Just wondered if you were relying on it continuing as a key part of your finances!!! As if so I wouldn't!!

Romain Garcin

16:03 PM, 29th April 2014
About 6 years ago

Hi Stephanie,

If you do not use the rent a room scheme, I think you might be able to claim a portion of your mortgage interests as expense.

I understand that there might Capital Gain Tax implications the day you decide to sell, though, so it would perhaps be best to consult an accountant.

Mark Alexander

16:17 PM, 29th April 2014
About 6 years ago

Reply to the comment left by "Industry Observer " at "29/04/2014 - 15:45":

If money gets that tight I could always rent it. I prefer my privacy though 🙂
.

Renovate To let

17:26 PM, 29th April 2014
About 6 years ago

Firstly a separate annexe is not eligible for the rent a room scheme - it has to be a room within the main residence, sharing facilities.

Second, a separate annexe can be a barrier to getting a residential mortgage (for your buyer when you sell). They don't like one title that has both resi bits and let bits as the time to repossess could be extended. Your current lender might not even let you do it without extra fees and a change in rate.

Third you run the risk of being assessed for separate council tax for the annexe as mentioned above even while it's empty.

Freda Blogs

17:51 PM, 29th April 2014
About 6 years ago

Have you checked whether you need planning consent? This would most likely be classified as a separate dwelling and may not be allowed.

Michael Barnes

19:31 PM, 30th April 2014
About 6 years ago

Reply to the comment left by "Renovate To let" at "29/04/2014 - 17:26":

Perhaps the annex and associated land could become a separate property and be registered as such at Land Registry? That would avoid problems when selling.

But, would need lender's approval, and I don't know about costs.

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