Mountbatten-Windsor, the younger brother of the King, is taking the police to court to challenge warrants connected to his arrest on suspicion of misconduct in public office over allegations he sent government documents to Jeffrey Epstein.
A private High Court hearing is due to take place on Thursday.
The former Duke of York receives an annual stipend - the amount of which has not been disclosed - provided by Charles from his private funds but a Palace source said it has been made clear that these monies should not be used to fund the judicial review.
The source added Mountbatten-Windsor's legal defence was a matter for him and his lawyers, and that Buckingham Palace has no role in determining its strategy or actions.
Mountbatten-Windsor was arrested on his 66th birthday earlier this year on suspicion of misconduct in public office following allegations he shared sensitive information with Epstein during his time as the United Kingdom's trade envoy.
The Telegraph newspaper previously reported that Mountbatten-Windsor has been granted permission to challenge whether Thames Valley Police acted lawfully over the searches relating to his arrest in February.
A judge at the Old Bailey issued warrants which allowed police to raid Mountbatten-Windsor's residence on the Sandringham estate and his former Windsor home Royal Lodge.
On Monday, a judicial spokesperson confirmed a hearing in Mountbatten-Windsor's legal claim is due to take place at 2pm on Thursday at the High Court.
The clarification from the Palace source will be seen as an attempt by the King to distance himself from the legal proceedings.
When Mountbatten-Windsor was arrested on February 19, the monarch issued a written statement, insisting "the law must take its course".
Criminal cases are brought by the Crown Prosecution Service in the name of the King as the reigning monarch.
The former duke, who now lives on the King's private Sandringham estate in Norfolk, was interviewed under caution before being released under investigation.
Police began their searches of the properties on the same day, with the force confirming on February 24 that they had ended.
The judicial spokesperson said the hearing will concern a bid by Thames Valley Police to restrict access to court documents, with the hearing to begin in private.
It is not known whether Mountbatten-Windsor will attend the hearing.
Should Mountbatten-Windsor succeed in having the search warrants quashed, the investigation could still proceed unaffected, said Nick Vamos, partner at law firm Peters & Peters.
"Even if there was some technical flaw with the original warrants, if that can be remedied then the Crown Court may simply allow the police to keep hold of all the material anyway," said Vamos, who is not directly involved in the case.
with Reuters
10°C