In 1993, Queen Elizabeth II and her heir, then Prince Charles, entered into an agreement with the government in which they agreed to voluntarily pay taxes but be exempt from inheritance tax. Mother and son are seen here in 2019 in London.
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In 1993, Queen Elizabeth II and her heir, then Prince Charles, entered into an agreement with the government in which they agreed to voluntarily pay taxes but be exempt from inheritance tax. Mother and son are seen here in 2019 in London.
Paul Edwards/WPA Pool/Getty Images
King Charles III has ascended the British throne but will not have to pay UK inheritance tax on the vast fortune he inherited from his late mother, Queen Elizabeth II. That’s because of a deal the royal family struck with the government nearly 30 years ago.
Ordinary citizens must pay a standard inheritance tax of 40% on any part of the estate worth more than a threshold of £325,000 (about $374,000). There are general exceptions, such as money left to a spouse or a charity.
But under an agreement with the monarchy that then-prime minister John Major announced in 1993, assets passed from the sovereign to his successor are exempt from inheritance tax.
The exemption was part of a wider tax deal
With Charles becoming king – at a time when the UK government and its constituents are struggling to cope with an energy crisis, soaring food prices and a troubled healthcare system – the arrangement is now under new scrutiny.
At the time, Major warned of “the danger that the assets of the monarchy will be sliced ​​by the capital tax over generations, thus changing the character of the institution in a way that few in this country will welcome”.
In a 1993 agreement, both Queen Elizabeth II and Charles agreed to pay personal income tax after asking the government how they could voluntarily pay tax.
The Queen will pay taxes “exactly the same as all other taxpayers,” Major said. But he also stated: “The unique circumstances of a hereditary monarchy require special arrangements for inheritance tax.”
Transfer the Duchy
The death of Queen Elizabeth II does more than encourage Charles to become king. It also drives two lucrative holdings that bring in millions each year: the late Queen’s Duchy of Lancaster, which now passes to Charles, and the Duchy of Cornwall, which passes from Charles to Prince William.
The two portfolios have been associated with the ruling sovereign and his or her heir since the 1300s. They stand apart from the Queen’s personal fortune, which is estimated at hundreds of millions of dollars.
The Duchy of Lancaster includes prime real estate in London, as well as 10 castles, farmland and an airfield. It was recently valued at $750 million and brought the Queen a net surplus of about $27.6 million. As an expert on royal finances pointed out to NPR, the monarchy forcibly seized most land holdings hundreds of years ago.
“In many ways the Queen should not own the Duchy of Lancaster” – David McClure, author A queen’s true worth, said last winter. “It really should belong to the state. But because it’s been going on for so long and it’s embarrassing, no one has done anything about it. It’s a cash cow, you know.’
The Duchy of Cornwall is also making money. Its latest audit shows net assets of about $1.2 billion and $26.4 million in “distributed surplus” for the fiscal year ending March 31, 2022.
Calculating the wealth of the monarchy is difficult because of their vast holdings and the difficulty of discerning the financial affairs of royals — people whose identities and livelihoods are intertwined with their official, state-supported roles.
In addition to the Duchy of Lancaster, for example, the sovereign also receives millions of dollars through an annual grant from the Crown Estate, a huge real estate portfolio that includes most of Regent Street in London. As the Crown Estate website notes, it “belongs to the reigning monarch” but is not their private property, and they only receive a share of the income it generates.
