As well as inheriting the throne from his mother, King Charles is also in line to receive much of her private wealth.
On top of official crown property, Queen Elizabeth amassed tens of millions of pounds in her own cash and assets – much of it from art and racehorses.
Most people pay 40 per cent inheritance tax on anything they inherit over a £325,000 threshold – meaning the monarchy would be on the hook for millions and the Treasury would be in for a windfall.
Yet King Charles is not liable for a penny due to a deal negotiated between the crown and John Major’s government in 1993, effectively exempting the monarch in situations like this.
How much does Charles inherit from the Queen?
In 2011 The Sunday Times Rich List estimated that the Queen’s private fortune was £370m.
But the exact nature of what Charles will be getting is not public because monarchs’ wills are sealed for decades after their death.
The new King is definitely at least in line to take over the ownership of the Queen’s private estate, the Duchy of Lancaster.
This estate, which is valued at more than £650m as of March 2022, will pay him an income of around £24m, as it did his mother. It plays a similar role to that of the Duchy of Cornwall, which he enjoyed as Prince of Wales and will pass on to his son.
What is this tax deal with the government?
The deal confirming the exemption of the monarchy from inheritance tax was never written into law, but was part of a more informal “memorandum of understanding” between the government and the palace. Its official name is the “Memorandum of Understanding on Royal Taxation”.
It makes fascinating reading for anyone interested in the tax affairs of the monarchy.
The inheritance section of the memorandum begins by noting that some royal assets are held by the Queen as “as Sovereign rather than as a private individual” and that “it would clearly be inappropriate for inheritance tax to be paid in respect of such assets”.
Assets of this type include official residences such as Buckingham Palace, the Royal Archives, the Royal Collection of paintings and other works of art.
They are not really the King or Queen’s personal property, but that of the crown and are thus not subject to inheritance tax.
But what about private property and wealth?
The next paragraph of the memorandum also exempts the monarch’s private property from inheritance tax, when it is being passed down as inheritance to the next sovereign.
It says: “In relation to assets which can properly be regarded as private, the arrangements provide that inheritance tax will not be paid on gifts or bequests from one Sovereign to the next, but will be payable on gifts and bequests to anyone else.”
This means that anything Charles inherits from Queen Elizabeth is not subject to inheritance tax.