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Granny annexe guide: Cost and rules on planning permission, council tax and home insurance
Not only can a so-called ‘tiny house’ add valuable living space to a property, it can also add to the value of your home, with searches for ‘houses for sale with granny annex near me’ soaring since the Covid pandemic.
Before you start building a granny annexe, it's important to understand the costs, planning permissions, council tax rules, and insurance implications in the UK.
What is a granny annexe
A granny annexe is a self-contained living space built on your property, typically in the garden.
In the UK, granny annexes are increasingly popular as a solution for multi-generational living or downsizing. They can offer independence to elderly relatives or adult children while keeping them close to home.
They’re also known as garden annexes or tiny houses.
Some homeowners build an annexe for rental income, but this may require specific planning permission and could affect your home insurance.
Granny annexe cost
The cost of building a granny annexe in the UK can be from £20,000 - £150,000 depending on size, materials, and features. Here's a breakdown of typical prices (assumption: average costs across the UK in 2025):
- Self-build granny annexe: £20,000 - £60,000
- Basic granny annexe (one bedroom, bathroom, and kitchenette): £30,000 - £50,000
- Mid-range annexe (larger living space, modern finishes): £50,000 - £80,000
- Luxury granny annexe (high-spec finish, multiple rooms): £80,000 - £150,000+
Additional costs may include:
- Planning permission applications (£200 - £500)
- Building regulations compliance
- Utilities connection (electricity, water, drainage): £5,000 - £10,000
You may also need to pay for landscaping or site preparation.
Granny annexe Council Tax
Many homeowners are surprised to learn a granny annexe may be subject to Council Tax in the UK.
If the annexe is self-contained, it’s usually assessed for Council Tax as a separate dwelling. A self-contained granny annexe is one which:
- Has its own kitchen and bathroom facilities.
- Has a separate entrance (not necessarily external—internal separation can be enough).
- Is capable of being lived in independently, even if it’s occupied by family.
In these cases, the Valuation Office Agency (VOA) will usually give the annexe its own Council Tax band. You’ll then receive two separate Council Tax bills.
However, discounts and exemptions may apply:
- 50% reduction if it’s used by a dependent relative.
- Full exemption if it’s occupied by a relative who is disabled or over 65.
Council Tax is not usually required if the annexe is used as part of the main home, such as for an office. This means it’s not classed as being self-contained.
Always check with your local council, as rules and eligibility may vary by area.
Granny annexe home insurance
Building a granny annexe can impact your home insurance because it will likely increase the rebuild cost of your home, affecting the cost of your home insurance premium.
Your policy terms and conditions may state that you must inform your insurer about any new structures on your property.
If the annexe is rented out, you may need landlord insurance and contents inside the annexe might require separate cover, especially if it’s occupied by someone outside your immediate family.
Failing to disclose a granny annexe to your home insurance provider could invalidate your policy.
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Granny annexe planning permission
In some cases, building a granny annexe in your garden requires planning permission in the UK.
You typically need permission if the annexe will be lived in full time as a separate residence, or will be used as a business premises with regular visitors (eg. A hair salon. A home office does not need planning permission).
You can avoid formal planning permission if your annexe or outbuilding qualifies under Permitted Development Rights (PDR), which allow certain works without applying for permission.
In these cases it must be an incidental building - this means it can be used as:
- A home office
- A gym
- Storage
- A summerhouse
What insurance do I need to work from home?
Crucially, it cannot be used as independent living accommodation, i.e. somewhere someone sleeps and lives full-time, or it won’t qualify for PDR.
Your annexe also cannot exceed a certain size, otherwise you will need planning permission:
| Requirement | Rule |
|---|---|
| Height (single-storey) | Maximum 2.5 metres if within 2 metres of the boundary. Else, up to 4 metres with a dual-pitched roof. |
| Eaves height | No more than 2.5 metres. |
| Overall height (flat roof) | No more than 3 metres. |
| Location | Must be behind the front wall of the house (no buildings in the front garden). |
| Coverage (footprint) | Outbuildings cannot cover more than 50% of the garden area. |
Building regulations approval is usually required, covering structural safety, insulation, plumbing, and electrics.
Consult your local planning authority before starting construction.
Building a Granny Annexe
Building a granny annexe as a self-build project can save money, but it requires good planning, time, and practical skills.
A self-build granny annexe typically takes three to six months, depending on weather, complexity, how much of the work you’re doing yourself, and the availability of materials and professionals.
Here's how it works:
1. Check planning permission and regulations
2. Create or buy your design plans
You can design it yourself, hire an architect or buy a flat-pack annexe kit from a company specialising in modular garden buildings.
3. Prepare the site
This includes clearing the land, leveling the ground and laying foundations. For a granny annexe, this is usually concrete slab foundations, or concrete piles, if the ground isn’t level.
4. Build the annexe structure
Once the foundations are ready erect the frame (usually timber or steel in self-build kits and add walls, roofing, and insulation—these are often pre-fabricated panels if it’s a kit.
Then fit windows and doors.
If you’re not using a kit, you’ll need to source all materials and manage carpentry and roofing yourself or with hired tradespeople.
5. Install utilities
You may need professional help for electricals, plumbing and heating.
This stage must meet building regulations, so you may wish to hire certified professionals.
6. Internal works and fitting out
Plastering and painting walls, installing flooring, a kitchen, a bathroom and lighting and sockets.
7. Final inspections and approval
Organise your local authority’s building control officer to inspect and sign off the work.
This ensures the granny annexe meets building regulations, making it legally habitable. Without this, you may not be able to insure or sell your home properly in the future.
8. Connect services and move in
Once signed off, ensure the annexe is connected to all utilities and has a Council Tax assessment if required.
Then furnish the space and it’s ready for use!
Conclusion
A granny annexe can provide flexible living options and boost your property’s value. Whether you're creating space for family or generating rental income, make sure you:
- Understand planning permission requirements
- Budget for the total cost, including utilities and council fees
- Check how it affects your home insurance
- Comply with building regulations
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