In a 1993 agreement with the government, Queen Elizabeth II and her heir, then-Prince Charles, agreed to voluntarily pay taxes in exchange for exemption from the inheritance tax. Here, in 2019, in London, we can witness a mother and son.
WPA Pool / Getty Images Paul Edwards King Charles III has assumed the throne of the United Kingdom, but he will not be subject to inheritance taxes on the vast fortune that his late mother, Queen Elizabeth II, left him. The reason for this is a contract the royals and the government made about 30 years ago.
Any portion of an estate that is valued higher than a threshold of 325,000 pounds (about $374,000) is subject to the usual inheritance tax rate of 40%, which is payable by regular residents. common exceptions include bequests made to a spouse or a charity.
However, under a deal with the monarchy that former Prime Minister John Major announced in 1993 negotiated, property transferring from a sovereign to their successor is exempt from inheritance tax.
The exemption was included in a wider tax agreement. The arrangement is now the subject of renewed attention as Charles becomes king at a time when the U.K. government and its citizens are attempting to deal with an energy crisis, skyrocketing food costs, and a failing healthcare system.
Major foresaw “the danger of the assets of the monarchy being salami-sliced away by capital taxes across generations, so transforming the nature of the institution in a way that few people in this country would embrace” when he issued his warning at the time.
In the 1993 agreement, after contacting the government to inquire about their options for voluntarily paying taxes, both Queen Elizabeth II and Prince Charles agreed to pay a personal income tax.
According to Major, the queen would pay her taxes “just the same way as every other taxpayer.” But he said, “Special inheritance tax provisions are required given the peculiar circumstances of a hereditary monarchy.”
ASK FOR THE DUCHY Charles becomes king for many reasons than just Queen Elizabeth II’s passing. It also activates the late queen’s Duchy of Lancaster , which now belongs to Charles, and the Duchy of Cornwall , which transfers from Charles to Prince William —two rich properties that bring in millions of dollars annually.
Since the 1300s, the two portfolios have been connected to the current king and his or her successor. They are distinct from the queen’s estimated hundreds of millions of dollars in personal wealth.
In addition to ten castles, large tracts of farmland, and an airport, the Duchy of Lancaster has prestigious real estate in London. It was recently valued at $750 million, and it provided the queen with a net surplus of roughly $27.6 million. The majority of the land holdings were taken by force by the monarchy hundreds of years ago, according to an expert on royal finances who spoke with NPR.
Author of The Queen’s True Worth David McClure stated last winter that “the queen shouldn’t own the Duchy of Lancaster in many ways.” “Really, the government ought to own it. But no one has taken action because it has persisted for so long and is embarrassing. It is, after all, a cash cow.”
The Duchy of Cornwall also generates revenue. Its most recent audit indicates $26.4 million in “distributable surplus” for the fiscal year that ended on March 31, 2022, and net assets of around $1.2 billion.
Due to their large assets and the difficulty in determining the financial affairs of royalty people whose identity and livelihood are entwined with their official, state-supported duties, calculating the monarchy’s wealth is complicated .
The king receives millions of cash from the Crown Estate, a massive property portfolio , which owns a large portion of Regent Street in London, in addition to the Duchy of Lancaster. It “belongs to the ruling monarch,” as the common exceptions 0 states, but it is not their private property, and they only get a portion of the income it creates.