Inheritance Tax Planning in Notting Hill: Protecting Property Wealth in One of London’s Iconic Postcodes

Belgravia Capital
3 days ago
5 min read

With its pastel-coloured townhouses, garden squares, and bohemian charm, Notting Hill is one of the most iconic and sought-after neighbourhoods in West London.

It’s also one of the most expensive. For families who own property in this area, particularly those who’ve held it for decades, inheritance tax (IHT) has become a significant concern.

The combination of high property values, frozen tax thresholds, and evolving government policies means that many Notting Hill residents face an inheritance tax liability of hundreds of thousands of pounds - even if they consider themselves asset-rich but cash-poor.

At Belgravia Capital Wealth Management, we specialise in helping families in Notting Hill prepare and plan effectively to reduce their exposure to inheritance tax.

In this guide, we’ll explain how IHT applies to your estate, why Notting Hill is particularly exposed, and how to take control before HMRC takes a 40% cut of your legacy.

Why Inheritance Tax Is a Key Concern in Notting Hill

Property Values That Exceed IHT Allowances

The nil-rate band for inheritance tax has been frozen at £325,000 since 2009. Although the residence nil-rate band adds another £175,000 when a property is passed to children or grandchildren, this still only brings the maximum tax-free threshold to £500,000 per person, or £1 million for a couple.

Meanwhile, even a modest house in Notting Hill can easily be valued at £2 million or more. That means:

The estate quickly exceeds the IHT allowance
Families may lose the residence nil-rate band entirely due to tapering
HMRC could claim 40% of the value over the threshold

Tapering Over £2 Million Estates

For estates over £2 million, the additional £175,000 residence nil-rate band is reduced by £1 for every £2 above that threshold. At £2.35 million, it is completely lost.

This tapering rule penalises many Notting Hill families who have seen their homes appreciate well beyond £2 million, even if the rest of their estate is modest.

How Inheritance Tax Works: A Recap for 2025

Nil-rate band: £325,000
Residence nil-rate band: £175,000 (only when leaving your main home to direct descendants)
Combined allowance for couples: up to £1 million
Tax rate: 40% on the value above the available allowance
Estates over £2 million: lose part or all of the residence nil-rate band

Real Example: A Notting Hill Estate and Inheritance Tax

Let’s say your estate consists of:

Townhouse on Westbourne Grove: £2.8 million
Savings and investments: £500,000
Art, jewellery, and valuables: £200,000
Total estate value: £3.5 million

If you’re a couple and qualify for the full £1 million tax-free allowance, you still face tax on £2.5 million, resulting in an IHT bill of £1 million, unless steps are taken to reduce it.

Key Strategies for Inheritance Tax Planning in Notting Hill

Gift Strategically During Your Lifetime

You can make tax-efficient gifts during your lifetime to reduce the size of your estate.

Tax-Free Gifting Options:

£3,000 annual exemption per person
Small gifts of £250 to any number of individuals
Wedding gifts up to £5,000 for children
Gifts from excess income (provided they don’t affect your standard of living)

If you make larger gifts and survive for 7 years, the value will fall outside your estate - potentially saving hundreds of thousands in IHT.

Place Assets in Trust

Trusts allow you to remove assets from your estate while retaining control over how and when they are distributed.

Popular options include:

Discretionary trusts for multiple beneficiaries
Bare trusts for straightforward gifts to adult children
Interest-in-possession trusts to provide income for one person and capital for another

Trusts are especially useful in Notting Hill for passing on family property, protecting wealth across generations, or structuring assets for younger beneficiaries.

Use Life Insurance to Cover the Tax

For those with large IHT exposure, a whole-of-life insurance policy can be an effective solution. If the policy is written in trust, the payout:

Does not increase the value of your estate
Can be accessed quickly to pay the IHT bill
Prevents the forced sale of property or investments

This is a common solution for Notting Hill families who want to preserve their home for children or grandchildren.

Review Your Will and Estate Structure

An outdated or poorly drafted will could cost your family significantly in lost allowances or missed planning opportunities. A professionally structured will should:

Maximise both partners’ tax-free allowances
Include clauses for gifting, trusts, and charitable legacies
Reflect your family structure, especially in blended families

We often find that wills drafted before the residence nil-rate band was introduced in 2017 are no longer tax efficient.

Use Pensions and Business Reliefs

Your defined contribution pension may sit outside your estate and be passed to beneficiaries free of inheritance tax (especially if you die before age 75). Similarly, certain investments, such as AIM shares or qualifying business interests, may qualify for Business Property Relief (BPR).

However, changes coming in April 2026 will cap BPR at £1 million per person, so early planning is essential.

Inheritance Tax Mistakes to Avoid in Notting Hill

Assuming you’re under the threshold because you don’t feel wealthy: Always get a full estate valuation, including property, art, and investments

Forgetting tapering rules: Estates over £2 million may lose valuable allowances

Waiting too long to gift: You must survive 7 years for gifts to be fully exempt

Holding life insurance outside of trust: That increases your estate value and your IHT bill

Planning for Families with Property but Low Liquidity

Many Notting Hill families are asset-rich, cash-poor, owning a valuable home but not much liquid wealth.

To plan effectively:

Consider equity release (if appropriate) to gift early
Use life insurance to create liquidity
Explore downsizing to reduce the estate value
Use trust or loan arrangements to shift value to children without immediate tax

How Belgravia Capital Wealth Management Helps Notting Hill Families with Inheritance Tax Planning

We offer comprehensive inheritance tax planning including:

Full estate and IHT exposure analysis
Strategic lifetime gifting and trust advice
Will and estate structuring in partnership with solicitors
Pension and life insurance planning
Solutions for non-domiciled or international clients
Business succession planning and property tax relief

Whether you’re preparing to pass on a home in Notting Hill or managing a multi-generational estate, our guidance ensures clarity and control.

Next Steps: What You Should Do Now to Mitigate IHT

Get your home and estate professionally valued
Review your current will and beneficiary structures
Identify whether your estate exceeds £2 million (and triggers tapering)
Consider gifting and trusts early, not just in later life
Speak to a specialist about structuring your estate for long-term efficiency

Conclusion: Protect Your Legacy in Notting Hill from Inheritance Tax

Notting Hill homes are often worth far more than their owners realise and with IHT thresholds frozen, many estates are unknowingly drifting into the taxable zone.

But with expert planning, you can: