The Crown Estate — estimated at over $34B in assets — now belongs to King Charles III. But he won’t have to pay the UK’s 40% inheritance tax. Here’s why

The Crown Estate — estimated at over $34B in assets — now belongs to King Charles III. But he won’t have to pay the UK’s 40% inheritance tax. Here’s why

King Charles III faces a tax benefit most Britons and even many wealthy Americans could only dream of: The head of the British monarchy is exempt from the U.K.’s inheritance tax.

Queen Elizabeth II’s death involves a transfer of her personal wealth of roughly $500 million to her first son, Charles. That means he doesn’t have to send roughly $200 million of Queen Elizabeth’s $500 million estate to the tax collector.

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But it also involves a change in ownership of the Crown Estate: a portfolio of assets and real estate valued at $34.3 billion. Its holdings include Buckingham Palace and land and properties across the London and the U.K.

To be sure, the Crown Estate is held in trust. That means King Charles III can’t sell any of its assets. But the royal family still collects about 15% of the profits from the estate through the “Sovereign Grant.” Last year, the Crown Estate earned $311 million.

The tax exemption is among the list of luxuries separating most Britons from the Royal Family in the U.K., where constituents are required to pay a 40% tax on property valued above $377,000.

In the U.S., where such levies are derided as a “death tax,” the burden on estates is anything but a, well, dying breed. Even though most estates in America aren’t large enough to trigger a federal estate tax — an estate must be worth more than $12.06 million to do so — 17 states and the District of Columbia have laws that can tax one’s inheritance or estate, or both.

A $200 million pittance?

Avoiding a 40% tax on $500 million isn’t trivial. But since wealth is often a relative term, the inheritance levy on Charles wouldn’t represent much of a grab in the royal bag.

Queen Elizabeth II was the U.K.’s longest serving monarch, reigning over 14 Commonwealth realms as well as Britain, for seven decades. In that time, the Crown Estate’s fortune of assets and real estate valued together swelled to a massive amount — but nowhere near the fortunes of the world’s wealthiest people.

The Crown’s assets are overshadowed, for example, by the fortunes held by Elon Musk, Jeff Bezos and Bill Gates.

Queen Elizabeth inherited about $81 million after her mother died in 2002 — passing down assets ranging from prized horses and jewelry to valued paintings and Faberg? eggs.

Over the years, those assets plus a healthy real estate collection — including Sandringham House in England and Balmoral Castle in Scotland — raised her total net worth to roughly half a billion dollars.

Elizabeth received income through the Sovereign Grant, a taxpayer-funded pool that amounted to nearly $100 million in 2021 and 2022 and is designed to cover official travel and the operating costs of various properties, including Buckingham Palace, the queen’s official residence.

That grant stems from a centuries-old agreement in which King George III surrendered his income from Parliament in order to receive a fixed annual payment for himself and future generations of the royal family. Charles is now set to receive income from the annual grant.

Death and taxes

Though Charles may cheat the “death tax” — taxes appear to be certain. Even for royalty.

The official Royal website reported that the queen volunteered to pay income and capital gains taxes in 1993 — despite not being legally obligated to do so — and has paid local taxes voluntarily.

And according to a “Memorandum of Understanding on Royal Taxation” written in 2013, Charles indicated he would pay taxes voluntarily upon inheriting the throne.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.