Safe homeowners insurers; curing holiday debt hangovers; college aid tips; the queen's tax bill AND YOU THINK YOU HAVE TAX HEADACHES
By John Sims

(MONEY Magazine) – Imagine your horror if you went from paying zero in taxes one year -- legally -- to owing nearly 40% of your income the next. That's precisely what Britain's Queen Elizabeth II would face this year if, as a result of her November promise to pay taxes for the first time in her 41-year reign, the 66- year-old sovereign were assessed at the same rate as her countrymen. Based on her earnings conservatively pegged at about $50 million a year, MONEY estimates her possible total tax bill for '93 at $20 million -- surely enough to make even a stiff upper lip quiver. Of course, few think that the queen will be zapped at the same rate as her wealthiest subjects. Far more likely, tax experts and veteran royal watchers told MONEY, is a quiet deal that would cut her tab to as little as $3 million, a sum she could pay without sacrifice since most of her living costs are met by the state. In any case, the terms of such an agreement will be kept secret from all but the monarchy and Inland Revenue, Britain's counterpart to the Internal Revenue Service. ''The Treasury will announce that it is satisfied,'' says the Daily Mirror's James Whitaker, doyen of Fleet Street's royal watchers, ''and that will be that.'' It's not that the queen couldn't afford to pay the full $20 million. After all, with a fortune on the order of $11 billion, Elizabeth II is reputed to be the world's richest woman. But royalty has its privileges, and there's a precedent for sweetheart deals. Consider that Elizabeth's maritally challenged heir, Prince Charles, voluntarily pays only 25% of his estimated $5 million annual income in tax. Also, that queenly $11 billion net-worth figure is misleading. Some $10.5 billion of it, including the $4.5 billion royal art collection and $500 million in crown jewels, is controlled by the state and therefore belongs to the queen in name only . Her five official residences too are owned by the government -- including 800-year-old Windsor Castle, where a $60 million fire last November helped focus British taxpayers' attention on the cost of their monarchy. Taxpayers have reason to care, since they pick up at least $75 million of that institution's cost. The British government staffs and maintains the queen's residences (annual expenditure: $37 million), her three planes and two helicopters ($10 million) and 412-foot yacht Britannia ($15 million). And it pays her an annual stipend of $25 million called the Civil List that goes for food, clothing and staff for Elizabeth and seven lesser royals, including Princess Margaret and Prince Andrew (the queen plans to pare the list this year to cover only three -- herself, her husband and the queen mother; she will subsidize the other royals). But few Britons have advocated taxing what amounts to the royal expense account. What will be taxed is the queen's investment income, 95% of which derives from a portfolio of blue-chip stocks and gilts -- the U.K. version of Treasury bonds -- managed by the Bank of England. (The other 5% comes from rents on tenant farms she owns.) Buckingham Palace asserts that the holdings are worth about $75 million and throw off $7.5 million a year in income, a plausible return given that seven-year gilts were recently paying 10.2%. Some royal watchers argue the portfolio's true value is nearer $700 million. But a more reasonable estimate comes from historian Phillip Hall of London's Hammersmith College, who explored the question of the queen's tax exemption in his 1992 book Royal Fortune: Tax, Money and the Monarchy (Trafalgar Square, $39.95; 800-423-4525). Extrapolating from records of a 1971 parliamentary inquiry into Elizabeth's finances, Hall calculates that her private holdings are worth perhaps $500 million today. Assuming a 10% yield, that puts her income at the $50 million cited above. So what could Elizabeth do to cut her tax bill, aside from being a tough negotiator? Since no one has asked her to pay capital-gains tax, says Bob Wightman, a partner at Touche Ross in London, she might shift money out of gilts into stocks and take most of her returns as capital gains. Or she could invest in tax-sheltered areas like London's run-down enterprise zones. Failing that, she might form a corporation -- Windsor PLC, maybe? -- since the top corporate tax rate is only 33%, vs. 40% for individuals. ''But to incorporate, her income and expenses must be related,'' says John Walford, an accountant with the London firm of Wilfred Fry. ''So she would have to invent a new trade -- you might call it queening -- and convince the Inland Revenue that she is on duty 24 hours a day and therefore can deduct all of her expenses. ''Of course, I don't know that the Revenue would believe her,'' he adds. ''They don't believe anyone else.''