The latest reduction was made following a review of royal finances by Royal Trustees, Rishi Sunak, the Prime Minister, Jeremy Hunt, the Chancellor, and Sir Michael Stevens, the Keeper of the Privy Purse.

The Treasury said: “Cutting the rate to 12 per cent is expected to reduce the Sovereign Grant by £24 million in 2024/25, compared with the rate staying at 25 per cent, and over £130 million lower in each of 2025 and 2026. This money will instead be used to fund vital public services for the benefit of the nation.”

Mr Hunt said: “For almost 300 years, kings and queens have surrendered the profits from the Crown Estate to the British people, and in return the Government has provided a fraction of that to properly support the King in undertaking his official duties.

“The new Sovereign Grant rate reflects the unexpected significant increase in the Crown Estate’s net profits from offshore wind developments, while providing enough funding for official business as well as essential property maintenance, including completing the 10-year reservicing of Buckingham Palace”.

The review took into account the Royal Household’s current income and expenditure, the level of the Sovereign Grant Reserve, and the costs of major projects to be carried out.

It will come into effect once legislation changing the rate has passed in the autumn and be used in the calculation of the grant for four years from 2024/25, when the palace renovation will be finished.