The members of the Royal Family are often the focus of everybody’s attention, but when it comes to their financial responsibilities, even more so. One of the intriguing issues arose recently after the death of Her Majesty Queen Elizabeth II in September of 2022. Considering the fortune Her Majesty used to own, will King Charles, the next legit owner, be required to pay inheritance tax on all her private assets? Or does this levy affect only ordinary citizens and has distinct implications for the Royal Family?
In our article, we delve into historical precedents of the issue, reveal how the taxation legislation impacts the monarchy now, and explain why King Charles may be exempt from paying the inheritance tax.
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Simply put, King Charles won’t pay tax on what he has recently inherited upon the Queen’s death. First, not all of the Queen’s assets belonged personally to her – some of them were held as Sovereign, such as Buckingham Palace, the Royal Archives, and the Royal Collection of various works of art. In respect of such assets, paying inheritance tax for them would be disrespectful. Second, according to the 1993 agreement, the inheritance passed “Sovereign to Sovereign” avoids the 40% levy for anything valued at more than £325,000 (in the case of the Duchy of Lancaster Estate).
The British Monarchy has a long history of navigating the intricacies of tax laws. For instance, when the income tax was first introduced in the last century, Queen Victoria respectfully obeyed the law. King George V, in turn, negotiated various exemptions in 1910, and his son, George VI, Elizabeth’s father, decided to stop paying any income tax in the 1930s.
When Queen Elizabeth II decided to revive the tradition in 1992, her initiative was accepted favourably. She would regularly pay income tax and capital gains tax ever since, just on a voluntary basis.
As we’ve already explained, the bequests that are passed from Sovereign to Sovereign are exempt from inheritance tax. However, if the inheritance is supposed to be passed to anyone but the Sovereign (still a member of the Royal Family), the immunity from tax cannot be applied anymore. It was agreed that King Charles would honour these terms. Consequently, he wouldn’t pay the inheritance tax.
By the way, the total value of the Crown Estate reaches £15.2 billion, of which 25% of the profits are given to the Royal family members as the Sovereign Grant to cover their official duties and restore Buckingham Palace after the accident. The UK Government believes the monarchy should have sufficient private resources and financial independence to perform its role in national life.
The preservation of the Crown Estate and Wealth has always been the top priority task for the British monarchy. For this reason, the Monarch’s Financial Arsenal comprises a set of carefully crafted strategies to ensure the longevity of the Royal Family’s financial legacy.
Who is responsible for crafting the financial strategies? It’s royal advisors. They are literally the architects of the Crown’s financial landscape. Not only do they help navigate legal complexities, but they also balance the preservation strategies with transparency and accountability. Furthermore, the Royal Household has always been committed to ensuring that the maintenance money or the Sovereign Grant (the Civil List in the past) they get is spent as efficiently and transparently as possible. A full yearly report on the Royal Household expenditure is always available in the public domain.
Another thing that may add to the intrigue is the Crown Jewels. The Jewels, as a symbol of the monarch’s authority and heritage, are both cultural treasures and an integral part of the royal wealth portfolio. They belong to the Royal Collection every item of which is held by the Monarch in trust for successors and the nation in a whole. The Monarch receives no benefit from the income generated by the Collection. For this reason, The Crown Jewels are not supposed to be taken under any tax arrangements.
