Counting the Royal tax cost
10 May 2023
The British monarch is exempt from paying taxes under tax legislation, although the late Queen Elizabeth II broke with tradition in 1993 and agreed to voluntarily pay income tax and capital gains tax on her private interests, but not on income from the Crown Estate. Whilst it isn’t clear whether King Charles will also opt to pay tax on his personal income, it is likely that under his plan to make the monarchy more sustainable, he will also choose to pay tax on elements of his income and gains.
The Crown is also exempt from rules designed to give full transparency over their interests – such as providing information under Freedom of Information requests, so there is no clear publicly available information relating to the income of or tax paid by the Royal Family. Information in the public domain is largely based on estimates and speculation. The only public information in the sovereign grant reports show the value of public funding of the Head of State.
So what information is available in respect of the Royal Family’s tax affairs and how much does the Royal Family contribute to the Treasury?
Based on the legislation, the exemption from paying inheritance tax (IHT) extends only to assets left by the monarch and their spouse to the direct successor. The assets left by the late Queen Mother were not subject to IHT on her death, but Princess Diana and Princess Margaret’s respective estates were subject to 40% IHT.
The King’s assets are likely to be largely illiquid, being made up of property and other non-cash assets, which would make funding an IHT liability difficult. However, as much of the asset base is also of historical significance, if the King were to be subject to IHT then it is possible that the conditional exemption for heritage assets would apply to a significant proportion of the assets. To qualify for the exemption, the assets would need to be available for public view, which would open more of the Crown Estate’s properties for public consumption.
The subject of the monarchy’s finances could continue to be a polarising subject for some in the midst of a cost-of-living crisis and whilst some aspects of their taxation affairs are clear, there may be further demands for more transparency.
The Crown is also exempt from rules designed to give full transparency over their interests – such as providing information under Freedom of Information requests, so there is no clear publicly available information relating to the income of or tax paid by the Royal Family. Information in the public domain is largely based on estimates and speculation. The only public information in the sovereign grant reports show the value of public funding of the Head of State.
So what information is available in respect of the Royal Family’s tax affairs and how much does the Royal Family contribute to the Treasury?
Based on the legislation, the exemption from paying inheritance tax (IHT) extends only to assets left by the monarch and their spouse to the direct successor. The assets left by the late Queen Mother were not subject to IHT on her death, but Princess Diana and Princess Margaret’s respective estates were subject to 40% IHT.
The King’s assets are likely to be largely illiquid, being made up of property and other non-cash assets, which would make funding an IHT liability difficult. However, as much of the asset base is also of historical significance, if the King were to be subject to IHT then it is possible that the conditional exemption for heritage assets would apply to a significant proportion of the assets. To qualify for the exemption, the assets would need to be available for public view, which would open more of the Crown Estate’s properties for public consumption.
The subject of the monarchy’s finances could continue to be a polarising subject for some in the midst of a cost-of-living crisis and whilst some aspects of their taxation affairs are clear, there may be further demands for more transparency.
Kate Aitchison
Partner, Tax
AUTHOR
Kate Aitchison
Partner, Tax