Taxation

The Queen has always been subject to Value Added Tax and other indirect taxes and she has paid local rates (Council Tax) on a voluntary basis. In 1992, however, The Queen offered to pay income tax and capital gains tax on a voluntary basis. As from 1993, her personal income has been taxable as for any taxpayer and the Privy Purse is fully taxable, subject to a deduction for official expenditure. The Civil List and the Grants-in-Aid are not remuneration for The Queen and are thus disregarded for tax.

Although The Queen's estate will be subject to Inheritance Tax, bequests from Sovereign to Sovereign are exempt. This is because constitutional impartiality requires an appropriate degree of financial independence for the Sovereign and because the Sovereign is unable to generate significant new wealth through earnings or business activities. Also, the Sovereign cannot retire and so cannot mitigate Inheritance Tax by passing on assets at an early stage to his or her successor.

As a Crown body, the Duchy of Cornwall is tax exempt, but since 1969 The Prince of Wales has made voluntary contributions to the Exchequer. As from 1993, The Prince's income from the Duchy has been fully subject to tax on a voluntary basis. He and Diana, Princess of Wales have always paid tax, including income tax, in all other respects.