Inheritance Tax Planning in Pimlico: How Local Families Can Protect Their Estate from the 40% Tax Trap

Pimlico is one of London’s most desirable residential areas. With its classic white stucco townhouses, garden squares, and excellent access to Westminster and the West End, it’s easy to see why homeowners here enjoy substantial property value growth.

But this success brings a hidden challenge - inheritance tax (IHT).

In a postcode where property values frequently exceed £1 million, many families in Pimlico are unaware they could face an inheritance tax bill worth hundreds of thousands of pounds.

Without forward planning, IHT can force loved ones to sell property or assets to pay HMRC.

At Belgravia Capital Wealth Management, we specialise in helping Pimlico residents prepare their estates and legacies to avoid unnecessary tax losses.

This blog explains what you need to know about inheritance tax in Pimlico, and how to take control before it’s too late.

Why Inheritance Tax Is a Problem in Pimlico

1. Property Prices Trigger IHT Automatically

The UK’s standard inheritance tax threshold, known as the nil-rate band, is £325,000 per individual. However, the average value of a three- or four-bedroom house in Pimlico is now well over £1 million.

This means that for many local families, just owning a home is enough to create an inheritance tax problem - even before you consider pensions, savings, or personal assets.

2. £1 Million Tax-Free Isn’t Guaranteed

Many people assume that couples can leave £1 million tax-free. While that’s potentially true, the full allowance depends on:

• Proper estate planning

• Passing the family home to direct descendants

• Keeping the estate under £2 million to avoid tapering

In practice, many Pimlico estates lose some or all of their reliefs due to lack of planning or simple asset inflation.

Understanding How Inheritance Tax Works in 2025

Let’s break it down:

• Everyone has a £325,000 nil-rate band

• An extra £175,000 residence nil-rate band applies when the family home is left to children or grandchildren

• Married couples and civil partners can combine their allowances for a total potential exemption of £1 million

• Any value above the threshold is taxed at 40%

So if your estate is worth £1.5 million, and you qualify for the full £1 million exemption, £500,000 could be taxed - resulting in a £200,000 tax bill.

A Typical Pimlico Inheritance Tax Scenario

Let’s look at a real-world example:

• You own a terraced home in Pimlico worth £1.3 million

• You have savings and investments worth £300,000

• You leave everything to your two children

Your estate is worth £1.6 million.

Even with full allowances (£1 million), your estate exceeds the threshold by £600,000, and inheritance tax could be up to £240,000 unless proactive planning is in place.

Inheritance Tax Planning Strategies for Pimlico Families

1. Make Use of All Allowances

Make sure your will is written to take full advantage of:

• The nil-rate band (£325,000)

• The residence nil-rate band (£175,000)

• Transferrable allowances between spouses or civil partners

We often review wills that fail to claim the full £1 million because of outdated language, trusts that no longer suit modern rules, or missed opportunities.

2. Start Gifting Early

You can reduce your estate by giving wealth away during your lifetime:

• £3,000 per year can be gifted tax-free

• You can carry forward one year’s unused allowance

• Small gifts of £250 to different individuals are allowed

• Gifts to spouses and civil partners are always exempt

Gifts made more than seven years before death fall outside your estate - making them a powerful planning tool for Pimlico homeowners sitting on significant property equity.

3. Use Trusts Strategically

Trusts allow you to pass assets to the next generation without triggering immediate IHT. In Pimlico, where homes and portfolios are large, trusts can:

• Keep assets outside your estate

• Provide control over how and when children receive funds

• Reduce exposure to the £2 million taper threshold

Types of trusts commonly used include:

• Discretionary trusts

• Interest in possession trusts

• Bare trusts for younger beneficiaries

Trust planning is highly technical, so we recommend a bespoke strategy built with your solicitor and financial adviser.

4. Put Life Insurance in Trust

A simple but overlooked solution: take out a life insurance policy, and place it in trust.

This means:

• The payout doesn’t increase your estate value

• It provides a lump sum to pay inheritance tax

• Your family avoids having to sell property quickly under financial pressure

Life cover can be tailored to match your expected inheritance tax bill, offering peace of mind and liquidity at the right time.

5. Review Business or Property Relief Eligibility

If your estate includes:

• Rental properties

• AIM-listed shares

• A trading business

…you may qualify for Business Property Relief (BPR) of up to 100%.

However, from April 2026, BPR is being capped at £1 million per person, a major change that will affect many high-value estates in Pimlico. Planning around these changes is time-sensitive.

6. Use Pensions for Legacy Planning

Pensions can be passed on tax-free in many cases, especially if the account is held in trust or the pension holder dies before age 75.

In Pimlico, where wealth is often spread across ISAs, investments, and pensions, reviewing your beneficiary nominations and estate structure can ensure pensions play their role in preserving wealth.

The Importance of Professional Valuation

You need to know the true value of your estate before making any decisions. We often help Pimlico families:

• Obtain up-to-date valuations of their property and investments

• Forecast inheritance tax exposure based on lifestyle and inflation

• Understand taper thresholds and loss of reliefs

With prices rising fast, many estates are more exposed than their owners realise.

What Happens If You Don’t Plan for Inheritance Tax as a Pimlico Resident?

If you don’t act in time, your family may face:

• A 40% tax bill

• Delays in probate while tax is paid

• Forced sale of property or assets

• Disputes between heirs or unintended consequences

Planning avoids surprises - and helps your wealth do what you intended.

Why Localised IHT Advice Matters

Many national firms offer inheritance tax planning, but their advice isn’t tailored to the reality of Pimlico life. Here, we deal with:

• High-value terraced and leasehold property

• Unregistered or complex property ownership

• Older wills that don’t account for the residence nil-rate band

• Blended families with different generational priorities

• Local business owners with property interests across Westminster

At Belgravia Capital Wealth Management, we understand these dynamics intimately and offer planning that reflects the realities of Pimlico families.

How We Can Help Pimlico Families with IHT Planning

We support Pimlico residents with:

• Estate reviews and IHT forecasts

• Will and trust structuring

• Gifting strategies and record-keeping

• Insurance and pension reviews

• Liaising with solicitors and tax professionals

• Preparing families for future legislative changes

Whether your goal is to protect your home, reduce tax, or pass on wealth efficiently, we provide bespoke strategies designed around your life.

Conclusion: Don’t Let the 40% Inheritance Tax Trap Catch You in Pimlico

Inheritance tax is no longer just a concern for the ultra-wealthy. In Pimlico, owning a single property can be enough to tip your estate into the taxable zone.

With tax thresholds frozen and reliefs tightening, now is the time to take control.

Early, strategic planning is the difference between passing your wealth to your family - or to the taxman.

Contact Belgravia Capital Wealth Management at

contact@belgravia-capital.co.uk

to schedule your personal inheritance tax review in Pimlico.