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How Does The Royal Family Get Money?

3 Ways the British Royal Family Stays So Damn Rich

It might seem like we know the British royal family based on how public their lives are, but when you really think about it, how much do you really know about the lifestyles the most famous family in England? While we do know what Prince William and Kate Middleton do when it comes to their jobs — like being a part of the Royal Air Force, in William's case — not many people know where the family's money and wealth actually comes from.

Spoiler alert: the bulk of the money that Queen Elizabeth II and her family have is inherited. What you might not know is how the family first received, and continue to receive, the bulk of that money. Essentially, there are three different ways in which the queen and her heirs make money every year and retain their wealthy status.

1. Private Income

For all intents and purposes, we're going to focus on how Queen Elizabeth II makes money, because technically it's the same formula for her descendants and her heirs. The queen has an undisclosed amount of earnings that come annually from "inherited private estates" including Balmoral Castle and other properties from her personal investment portfolio.

According to the royal family's website, this inheritance initially came from Her Majesty's father, King George VI, and also consists of a valuable artwork and stamp collection. Last year, her private income was estimated to be about £340 million ($490 million), according to a Sunday Times report in 2016.

When it comes to this area of her wealth, the queen does pay taxes on any income she privately makes from her different investments, but what she pays has always remained secret. These properties — unless she chooses to sell them — will most likely go to her descendants someday.

2. The Privy Purse

The Privy Purse isn't just a fancy British term for a handbag or money holder, although if you really think about it, that's sort of what it is — a holder of the set money that the queen receives during her time as monarch. The second form of royal income is all about The Duchy of Lancaster, which provides the Queen with a set income — so no work-related expenses like touring the country and making public appearances have to be paid with this, although some are — called the Privy Purse.

Simply put, The Duchy of Lancaster is a "portfolio of land and other assets that have been in the royal family for hundreds of years." As of early 2017, that compilation of land and property came to about 18,433 hectares. The Privy Purse is all of the income generated from those properties (about £17.8 million or $21.7 million for 2015-2016) and it's been around since 1399.

"Its main purpose is to provide an independent source of income, and is used mainly to pay for official expenditure not met by the Sovereign Grant (primarily to meet expenses incurred by other members of the Royal Family)," the official Royal Family website explains.

Side note: Prince Charles, who is currently next in line for the throne, runs his own estate (that again has properties that have been passed down and cannot be sold from back in 1337) called The Duchy of Cornwall. Charles currently resides over this money (like the queen does for The Duchy of Lancaster), and it is responsible for covering all of the personal, and most of the official expenses, for his family line, which would include Prince William and Harry. When Charles ascends the throne, Prince William will become the heir to The Duchy of Cornwall and it will continue to go down the line to the male heirs.

3. Sovereign Grant

Last but not least is the Sovereign Grant, which is handed out by the Treasury and is funded by taxpayer dollars (or pounds in the UK). This is where the majority of the British Royal Family's income hails from and it's used to carry out the royal duties, cover royal travel, pay for the staff, and help maintain Buckingham Palace's upkeep.

In 1760, the Sovereign Grant was set up thanks to King George III, and it's basically an agreement that was made between Parliament and the Royal Family saying they would hand over all of the profits from the Crown Estate to the government in return for a percentage of the profits each year.

What is the Crown Estate, you ask? Well, according to BBC News, it's "an independent commercial property business and one of the largest property portfolios in the UK." It is made up of residential properties, businesses, shops, and more. Basically, it is everything that the Monarchy owns — for the duration of their reign — and the residents of the United Kingdom pay taxes on it, thanks to the government. How the Sovereign Grant works is this: The Crown (in this case the queen) owns the Crown Estate. That estate makes money, which in turn gets paid to the HM Treasury, who calculates what 15 percent of the surplus income is. That amount is then paid to the queen in the form of a Sovereign Grant and used for royal expenses. It's a mouthful, but it actually makes sense.

While living like a royal does sound great, knowing where the family's money comes from is much more complicated than we expected. But, at the end of the day, money is money, and the British royal family has a lot of it. Cheers!

Image Source: Getty / Dominic Lipinski
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