King Charles III is exempt from inheritance tax thanks to a 1993 agreement: NPR
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King Charles III has ascended to the British throne, but he won’t have to pay UK inheritance tax on the enormous wealth he inherited from his late mother, Queen Elizabeth II. It’s because of an agreement the Royal Family made with the government almost 30 years ago.
Ordinary citizens must pay the standard inheritance tax rate of 40% on any part of an estate whose value exceeds a threshold of 325,000 pounds (about $374,000). There are common exceptions, such as money left to a spouse or charity.
But under an agreement with the monarchy that then Prime Minister John Major announced in 1993, assets passed from a sovereign to his successor are not subject to inheritance tax.
The exemption was part of a larger tax deal
As Charles becomes king – at a time when the UK government and its constituents are struggling to deal with an energy crisis, soaring food prices and a struggling healthcare system – the arrangement is now making the leap. subject to further examination.
At the time, Major warned of “the danger that the assets of the monarchy will be amputated by the taxation of capital over generations, thus altering the nature of the institution in a way that few in this country would welcome”.
In the 1993 agreement, Queen Elizabeth II and Charles agreed to pay personal income tax, after contacting the government to ask how they could voluntarily pay tax.
The Queen would pay her taxes “in exactly the same way as all other taxpayers”, Major said. But he also said: “In the unique circumstances of a hereditary monarchy, special provisions are needed for inheritance rights.”
Skip the Duchy
The death of Queen Elizabeth II does more than trigger Charles’s accession to kingship. It also sets in motion two lucrative holdings that generate millions in revenue each year: the late Queen’s Duchy of Lancaster, which now reverts to Charles, and the Duchy of Cornwall, which passes from Charles to Prince William.
Both portfolios have been linked to the reigning sovereign and his heir since the 1300s. They stand apart from the Queen’s personal fortune, estimated at several hundred million dollars.
The Duchy of Lancaster includes prime real estate in London, as well as 10 castles, tracts of farmland and an airfield. It was recently valued at $750 million and had a net surplus of around $27.6 million for the Queen. As one royal finance expert noted to NPR, the monarchy forcibly seized most landed property hundreds of years ago.
“In many ways the Queen should not own the Duchy of Lancaster,” said David McClure, author of The true value of the queen, said last winter. “It really should be state owned. But because it’s been going on for so long and it’s embarrassing, nobody’s done anything about it. You know, it’s a cash cow.”
The Duchy of Cornwall is also a silver producer. Its most recent audit lists net assets of approximately $1.2 billion and $26.4 million in “distributable surplus” for the fiscal year ended March 31, 2022.
Calculating the monarchy’s wealth is complicated, due to their vast holdings and the challenge of discerning the financial affairs of royalty – people whose identities and livelihoods are intertwined with their official roles backed by government. ‘State.
As well as the Duchy of Lancaster, for example, the sovereign also receives millions of dollars through an annual grant from the Crown Estate, a massive property portfolio that includes much of London’s Regent Street. As the Crown Estate website notes, it “belongs to the reigning monarch”, but it is not their private property, and they only receive a share of the revenue it generates.