LONDON -- Queen Elizabeth II will begin paying income tax on all her personal income and also become subject to capital and inheritance levies, Prime Minister John Major said Thursday.
The prime minister gave details of the new tax arrangements for the queen and the prince of Wales in the House of Commons. The announcement came after the royals agreed in principle before Christmas to make themselves liable for taxes.
Major said that under the new arrangements, which are to come into effect on April 6 and will be 'voluntary,' the queen would pay income tax at standard rates.
'I can confirm...that the queen will pay income tax at the marginal rate of 25 percent and 40 percent in precisely the same way as every other taxpayer,' he said.
The queen also would be liable to pay tax on 'Privy Purse' income used for private purposes, but not the part used for public functions, Major said. The Privy Purse is the queen's income from her estates and other assets, principally the Duchy of Lancaster, on which she made a net income of $5.1 billion last year.
The queen, however, would not be liable to pay tax on her income from the government's Civil List payments, because that is used for her public duties, Major said. 'The same will apply in respect of other payments and facilities provided by the state for official purposes,' he said.
Major said the queen wouldpay inheritance tax, but only under special arrangements that exclude assets such as royal palaces.
The tax would apply to 'all bequests or gifts by the sovereign, other than to transfers of assets from one sovereign to his or her successor,' he said.
Major said the prince of Wales, who already pays tax on all his income except that from the Duchy of Cornwall, now would pay tax on that 'to the extent that it is used for private purposes.'
There had been widespread criticism of the royal family's financial arrangements and tax-free status. The queen was especially criticized after it was announced that taxpayers would pay for repairs to Windsor Castle, which was heavily damaged by fire.