02/06/2012 08:45 BST | Updated 02/06/2012 08:45 BST

Granny Flat Tax Breaks Considered By Eric Pickles

Hundreds of thousands of families could benefit from tax breaks on "granny flats" under plans being considered by the government, Eric Pickles said on Saturday.

The Communities Secretary said he is keen to scrap council tax for live-in annexes, arguing the current rules are "fundamentally unfair".

It is believed ministers are also considering overhauling planning regulations and fees to make it easier for homeowners to convert garages and other outbuildings.

eric pickles

Eric Pickles said the current rules are 'fundamentally unfair'

But Labour said it was unclear who would benefit from any further relaxation of the tax rules as annexes occupied by dependants aged over 65 are already exempt.

Government sources conceded that the timing or detail of any change, which would probably require primary legislation, had not yet been considered.

Such a move would also reduce the income of local councils at a time when town halls are already being forced to implement severe spending cuts

Pickles told the Daily Telegraph: "We are keen to remove tax and other regulatory obstacles to families having a live-in annexe for immediate relations.

"We should support homeowners who want to improve their properties and standard of living. These reforms should also play a role in increasing the housing supply."

The MP said it was unfair for households to be charged twice by paying council tax on their homes and annexes - which are regarded as separate dwellings.

It is estimated that as many as 300,000 households in England could benefit from the change.

The reforms are expected to form part of a package of policies to increase housing supply and address the shortage of affordable homes over the next two years.


Shadow communities secretary Hilary Benn said occupied 'granny flats' had been exempt from council tax since 1997.

"This cynical spinning shows that once again the Tory-led Government are over-claiming and under-delivering for our nation's pensioners.

"This seems to be nothing more than an attempt to deflect attention from their housing crisis."

Under the 1997 regulations, council tax is not paid on annexes occupied by relatives who are over 65, "mentally impaired", or "substantially and permanently disabled".

A spokesman for Mr Pickles said the proposal was to extend the exemption to allow annexes inhabited by any family member, not just pensioners, to be free from council tax.

No decision had been taken on whether town halls would be compensated by central government for the lost revenue, he said.

Housing minister Grant Shapps said: "We should support homeowners who want to improve their properties and standard of living. At every opportunity Labour want to find a way of raiding the pockets of the public."