Consultations & legislation
FAQs: Royal Taxation
1. What does the MoU do?
The MoU is a routine update of the MoU first put in place in 1993. Now that the sovereign grant has replaced the civil list, the text needs adjustment. The basic arrangements remain the same as before:
- The Queen and the Prince of Wales pay contributions in lieu of income tax voluntarily on the parts of their private incomes which are not spent on official duties;
- in both cases the normal income tax rules apply;
- the rules about CGT and IHT are the same as before
2. Why doesn’t The Queen pay income tax like everyone else?
The sovereign has Crown exemption from liability to pay income tax. The same is true of the profits of the Duchy of Cornwall which go to the Prince of Wales. The Queen and the Prince of Wales have undertaken not to engage in artificial tax avoidance practices.
3. What official duties may be allowed against tax?
Essentially the costs of carrying out the unique responsibilities and engagements that make up royal responsibilities. Examples include the cost of travel to official functions, ceremonial events, receptions and hospitality, administrative support and so on.
4. How much income tax do The Queen and Prince of Wales pay?
Like other taxpayers, The Queen and Prince of Wales are entitled to privacy about their tax affairs.
5. What other taxes do The Queen and Prince pay?
They pay most taxes in exactly the same way as everyone else, eg VAT, council tax, VED, and so on.
6. How much public support does The Queen get?
The Queen gets a single grant, the sovereign grant, each year. It is £31m in 2012-13 and will be £36.1m in 2013-14. For more details on the Sovereign Grant, please refer to the separate section on the website on the Sovereign Grant Act 2011.
7. What does The Queen spend the sovereign grant on?
The sovereign grant meets The Queen’s official expenses in carrying out Her duties as monarch. The royal household’s annual report explains The Queen’s official business. It includes receptions, visits, openings, investitures, garden parties and many other opportunities for the public to appreciate the Queen’s dedication to the country and the Commonwealth.
8. Why isn’t the sovereign grant taxable?
The sovereign grant is used to meet The Queen’s official expenses. Parliament does not intend that these expenses should be met out of taxed income.
9. Why does The Queen get favourable tax treatment as well as public support?
The MoU uses essentially the same income tax rules as apply to other people, except that The Queen and the Prince of Wales pay voluntarily. So the MoU recognises that they meet their own official expenses, and those of other members of the royal family, and relieves these amounts of income tax.
10. How is The Queen accountable for Her use of public support?
Under the Sovereign Grant Act 2011, the accounts of the sovereign grant are audited by the NAO and laid before parliament. So the PAC may choose to scrutinise them. This is the same transparency as for government departments.
11. What taxes do other members of the royal family pay?
They do not have Crown exemption and so pay tax like everyone else. That part of their income spent on royal duties may be allowed against tax.
12. What is The Queen’s personal wealth?
The Queen and the Prince of Wales have the same right to privacy over their personal financial affairs as anyone else.
13. What inheritance tax will be paid when The Queen dies?
None on bequests to Her successor. Much of the sovereign’s wealth is not personal but held in right of the Crown, eg the Crown jewels and the royal palaces. The sovereign needs financial independence through personal wealth in order to support the duties of the post. Yet the sovereign cannot engage in business to build up lifetime wealth. The exemption from inheritance tax for sovereign to sovereign bequests recognises this constraint and makes for an efficient transition to the next reign.
All other private bequests from The Queen’s estate will bear IHT.
14. Will the Prince of Wales honour the MoU when he succeeds?
Yes. He undertook to do so when the MoU was first established in 1993.
15. Why has the wording of the MoU changed so much?
It had become out of date. It was written when the main grant paid to the royal household was the civil list. The sovereign grant is structured differently and so it is time to refresh the MoU. The new text also replaces references to named members of the royal family (and the Prince of Wales’s family) with a more general reference to those members who assist The Queen with Her duties.
There is no substantive change in the amounts of tax paid and no impact on the Exchequer.
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