Ministry of Housing, Communities & Local Government
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Government ends 'family tax penalty' for hardworking families

£5 million Council Tax discount will help increase affordable housing.

Communities Secretary Eric Pickles hails the introduction of a national Council Tax discount worth £5.3 million for family annexes.

Ending this unfair Council Tax surcharge will ensure that annexe owners are treated fairly. Reducing this burden will save an average £485 a year on a typical £2,427 combined yearly bill.

The government has proposed a discount level at 50% to so that properties with annexes should pay more than those without but removing the unfairness of double taxation that existed previously. This reflects the level of Council Tax that would be due on a property and annexe if it were banded as 1 property.

With both an ageing population and young people finding it difficult to get on the housing ladder, the government is removing barriers to extended families that live together.

Ministers believe the tax cut will ultimately save taxpayers’ money by helping reduce adult social care costs in the long-term. It will deliver against the government’s commitment to help more people live independently. The reforms will also increase housing supply and support the construction trade.

Eric Pickles said:

I believe the government should be supporting hard-working families who do the right thing. Removing the family tax penalty on annexes and home improvements will help provide more affordable housing and strengthen the bonds that tie society together.

By cutting town hall taxes on family annexes, extensions and home improvements, we are supporting aspiration and choice, as well as giving a boost to the construction sector and local traders.

These common sense tax cuts will increase the provision of affordable housing to those on lower and middle incomes. Encouraging extended families to stay together will reduce social care costs to the taxpayer, and protect independence and dignity for the young and old.

The government has also removed the community infrastructure levy on self-build properties, including all extensions, family annexes and home improvements. Ministers also intend to remove Section 106 housing levies on such annexes and extensions - the Autumn Statement has announced proposals that such levies may only be charged on developments larger than 10 units.

Further information

  1. The overall cost of a 50% discount has been estimated at £5.3 million for 2014 to 2015 and will be reimbursed to the relevant billing authorities by DCLG.

  2. There is already a Council Tax exemption for annexes occupied by a dependant aged 65 years or over, or if severely disabled. However, it does not apply to families otherwise.

  3. There are an estimated 24,150 family annexes in England, but ministers believe far more households could be helped by tax cuts that encourage more annexes - and more conversions of outbuildings and new extensions.

  4. The discount applies to all annexes used by the occupiers of the main building or by their immediate family members including parents and teenagers. Without any discount, a taxpayer with a Band D property and Band A annexe would get 2 bills totalling £2,427 (£1,456 + £971). A 50% discount on the Band A annexe would reduce that combined bill by £485.

  5. A national family annexe discount does not entail any valuation or revaluation process. Householders simply apply to their local authority, as they do for existing discounts (such as single person discount). It applies to homes in England.

  6. Having successfully frozen Council Tax for the last 3 years (cutting Council Tax by almost 10% in real terms), the government has also announced a further 2 years of Council Tax funding that will deliver an unprecedented 5-year freeze. This will cover the whole lifetime of this Parliament and is potentially worth up to £1,100 to a taxpayer in an average Band D home in England.

  7. See the Council Tax: national discount for annexes consultation response.

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