Taxation and the monarchy

It has long been argued by republicans that the Queen and Royal Family
derive great dividends each year from the British taxpayer, while giving
back little, or nothing, in return. In truth, this is not entirely true. Like everyone,
the Queen has always paid indirect taxes—that is, Value-Added Tax
(VAT), and other tariffs levied on consumer goods and services. She has
also long paid, on a voluntary basis, local taxation—that is, Council Tax and,
before that, the Community Charge (or ‘Poll Tax’) and rates. It was not until
1993, however, that she agreed to pay direct taxes—principally, Income Tax.
This decision was taken in the wake of a mounting backlash over the revelation
that much of the £60m cost of repairing Windsor Castle following a
devastating fi re in 1992 was funded by taxpayers, despite the fact that they
already hugely subsidized the Royal Household.
The monarch and certain members of her immediate family do, however,
continue to enjoy substantial tax breaks not granted to her subjects. In particular,
while the Privy Purse pays tax and the Queen’s personal estate is
subject to Inheritance Tax, grants-in-aid are not regarded as taxable, and
neither is any transfer of property ‘from sovereign to sovereign’—that is,
between the Queen and her successor.