Royal finances: Where does the King get his money?

The government has confirmed how much money it gave to the Royal Family last year and how much it will provide in the future.

The taxpayer-funded settlement, known as the Sovereign Grant, is paid annually - but is not the King's only source of income.

For 2022-2023, the Sovereign Grant was worth £86.3m, the same as in 2021-2022.

But repairs to Buckingham Palace - which is undergoing a 10-year £369m refurbishment plan - and the costs associated with King Charles succeeding Queen Elizabeth, plus higher-than-expected inflation, took total spending for the period to £107.5m, according to the Royal Household's annual financial report.

That represents a 5% increase on the £102.4m spent the previous year.

The shortfall, with spending greater than the Sovereign Grant, meant drawing £20.7m from reserves.

The King and other working members of the Royal Family use the money to pay for expenses related to their official duties.

The vast majority is spent on the upkeep of properties and staff costs.

Members of the Royal Family carried out 2,700 engagements across the UK and abroad during the year.

More than 95,000 guests attended 330 events at royal residences, including receptions, award investitures and garden parties. Buckingham Palace received more than 183,000 items of correspondence.

The Royal Family was previously funded through a fixed annual payment known as the Civil List.

This was replaced by the Sovereign Grant in 2012.

Profits of the Crown Estate - a property business owned by the monarch but run independently - go to the Treasury. The level of profit is used as a benchmark to calculate the funding given by the government to the Royal Family.

The Crown Estate had assets worth £16.5bn in 2022: almost £8bn of properties in London, including Regent Street, as well as nearly half the land along the coast of England, Wales and Northern Ireland.

It is not the King's private property - it merely belongs to the monarch for the duration of their reign. The King cannot sell its assets or keep any profits for himself.

The Sovereign Grant had been worth 15% of the Crown Estate profits generated two years previously.

In 2017 it was agreed that this would increase to 25% for 10 years to help pay for the Buckingham Palace repairs.

Under the Sovereign Grant Act 2011, if the Crown Estate's profits fall, the monarch still receives the same amount as the previous year, with the government making up the difference.

After a review, the government announced the Sovereign Grant will be worth 12% of the Crown Estate's profits from next year.

The decision follows a significant increase in profits from six new offshore wind farms on the Crown Estate, worth £1bn.

In January, King Charles said he wanted the extra profits to be used for the "wider public good".

Cutting the percentage will mean the total Sovereign Grant for 2024-25 will remain at £86.3m for the third consecutive year.

However, if Crown Estate profits grow as predicted, even under the reduced formula, the amount given to the Royal Family would then increase substantially, to £124.8m in 2025-2026 and £126m in 2026-2027.

The 12% figure is due to remain in place until the end of the 10-year Buckingham Palace restoration project in 2027.

The King also receives money from a private estate called the Duchy of Lancaster, which is passed down from monarch to monarch.

It covers more than 18,000 hectares of land in areas such as Lancashire and Yorkshire, as well as property in central London. Worth £654m, it generates about £20m a year in profits.

Whoever holds the title of Duke of Cornwall (currently Prince William) benefits from the Duchy of Cornwall.

It mainly covers land in south-west England. Worth £1bn, it generated a net surplus of £24m in 2022-23.

The King and Prince William receive the profits from the duchies personally, and can spend them as they wish. However, they are not entitled to any proceeds from the sale of any estate assets, which must be reinvested.

The monarch also owns the royal palaces (which are not part of the Crown Estate) and part of the Royal Collection of art, but these do not generate income.

Some palaces are looked after and funded by the Royal Family itself. Others - such as the Tower of London - are managed by Historic Royal Palaces, an independent charity.

The Royal Collection is also run by a charity, the Royal Collection Trust, which reinvests income received from ticket sales and retail outlets.

The King also privately owns properties such as Sandringham and Balmoral.

In addition, some Royal Family members have private art, jewellery and stamp collections which they can sell or use to generate income as they wish.

In 1992, The Queen volunteered to pay income tax and capital gains tax on her personal income, and the King does the same.

The two duchies are exempt from corporation tax, but the King and the Prince of Wales voluntarily pay income tax on the revenue they generate. However, the amount of tax they pay is not made public.

They do not pay capital gains tax because they do not benefit personally from any increase in the duchies' assets.

Members of the Royal Family pay tax on any income generated from privately-owned assets.

King Charles does not have to pay inheritance tax on the money he received when Queen Elizabeth died, under the "sovereign to sovereign" exemption agreed in 1993 by then Prime Minister John Major.

Some argue that the true cost of the Royal Family is much greater than the size of the Sovereign Grant.

It does not cover their security arrangements, which are usually paid for by the Metropolitan Police, although the cost is not disclosed.

In May, the Treasury confirmed that Queen Elizabeth II's funeral had cost the government an estimated £162m.

It is not yet known what the King's Coronation cost, although unofficial estimates suggest it could be between £50m and £100m.

Republic, an organisation which campaigns for an elected head of state, previously estimated that the total yearly cost of the monarchy - once security and other additional costs are factored in - is about £345m.

It is impossible to provide a concrete figure for the scale of the Royal Family's contribution to the UK economy. Estimates vary considerably.

The consultancy Brand Finance argues the cost of Royal Family is eclipsed by what it contributes by boosting tourism and trade.

However, Republic questions the validity of its sums, and points out that many of the Royal Family's assets are the property of the state.

CORRECTION 27 JULY: A previous version of this article said the Sovereign Grant can only be used for official duties. This is not the case and the word "only" has been removed. Additional information was also added throughout the piece.