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Annexes to be exempt from infrastructure levy

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Ministers have proposed a series of tax cuts to reduce the cost of annexes and home extensions including limiting the use of the recently introduced community infrastructure levy.

The Department for Communities & Local Government has called time on ‘stealth taxes’ on planning applications for home extensions, and announced a 50% council tax discount for annexes.

Civil servants have estimated the new council tax discount will cost just over £8m a year for all English councils, but a new burdens assessment is set to compensate any authority which loses revenue as a result.

Homes with annexes are currently subject to two separate council tax bills, but under the government’s plan councils will only be able to charge half of what they currently do on the tax bill for the annex.

Officials have also indicated ministers intend to end the use of section 106 agreements and the three-year-old community infrastructure levies on planning applications for extensions and annexes.

A DCLG spokesman said: “The government is also confirming that it intends to remove the community infrastructure levy on self-build properties, including all extensions, family annexes and home improvements.

“Ministers also intend to seek to remove section 106 housing levies on such annexes and extensions – a ‘stealth tax’ slowly being introduced by town halls.”

The announcement comes after one Kensington & Chelsea RBC resident was asked to pay the council £825,000 in section 106 and infrastructure levy charges for a 1,130sq m basement extension.

In a separate case Westminster City Council charged a £3.85m levy on an application to turn a former club on Piccadilly into a private home worth an estimated £200m.

Both councils said the money would be used for affordable housing, but communities secretary Eric Pickles said the government’s own proposals would increase the supply of affordable homes.

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

A consultation on the proposal to introduce a 50% council tax discount was published on Saturday and is due to close in October.

DCLG is due to unveil revamped planning guidance and a new, experimental “streamlined” website later this week.

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