Being a highly wealthy individual, you can only imagine that upon the Queen’s death, her estate would be left liable to pay a substantial amount of Inheritance Tax.
However, through her capacity as Sovereign and a deal struck with the former Conservative Prime Minister John Major in 1993, it is unlikely that when the Queen dies that her Estate will pay any Inheritance Tax.
Her Capacity as Sovereign
The Queen holds a large amount of her properties and assets in her capacity as Sovereign, for example her Royal Palaces, jewels and crowns. Therefore these are technically owned by the UK Nation and are exempt from being sold or transferred to anyone or to her private estate. In the circumstances, as these properties and assets are owned in this capacity they are exempt from Inheritance tax upon her death as they would not be considered as part of her estate.
Sovereign to Sovereign
The usual protocol is that an individual with an estate worth more than £325,000 subject to any additional allowances through the death of a spouse, would be taxed 40% over that limit. However, with regards to the Queens private wealth, a “Sovereign to Sovereign” deal in 1993 allowed for any assets left by the current UK Monarch to their immediate successor will be free from Inheritance Tax.
The 1993 ‘Sovereign to Sovereign’ deal was also controversially applied to the Late Queen Mother’s estate despite her not being the Sovereign or ever having been. This was to ultimately protect the Queen as she would have been liable for the Inheritance Tax bill of approximately £20 million and most likely would have had to sell her privately owned property of Balmoral and Sandringham to pay this.
It is most likely that the Queen will give her wealth to Prince Charles as her immediate successor to the Throne and therefore her assets will be free from Inheritance Tax. If however, the Queen chooses to leave any part of her estate to her other children or relative, Inheritance Tax will be payable.
Why is Monarchy to be exempt from Inheritance Tax?
The reasons the Monarch has been exempt from paying Inheritance Tax is to safeguard the erosion of the Sovereign’s wealth. The Monarch doesn’t work or trade to ‘grow’ their estate as a normal individual would during their lifetime and if the Monarch’s estate was repeatedly subjected to Inheritance Tax then their wealth would deplete dramatically.
If Fisher Jones Greenwood LLP can assist you in with any life planning or inheritance tax issue then please contact us on 01206 700113 or email [email protected] to arrange an appointment.