I am in the process of buying a house that has an annexe attached to it. I want to rent the annexe out. Do i need permission from the council to do this?

Most annexes only have permission to be used in conjunction with the main house and not as a separate dwelling. e.g. as a granny flat or nanny flat.

If you want to rent it out separately I think you'll find that you will need planning permission.

Someone I know did this. They did not require permission and were able to claim the first £4,250pa of the rent tax free under the Government's Rent a Room Scheme because the annexe was classified as part of their family home. Google 'rent a room scheme' and go to the Direct.Gov web site for further info. The page also has links along the right hand side to other aspects of letting that you should be aware of.

The annexe is currently separately rated for council tax from the main house. Does this make a difference ?

If the annex is separately rated, the council considers it to be a separate dwelling and you do not need permission to let it. I would also look into whether you would be liable for stamp duty on the annex in it's own right.