In much of London the family home alone can carry an estate past the inheritance tax thresholds, so the question is less often whether tax is in view and more often how much of the estate the allowances still reach.
The average London property was worth £544,814 in May 2026, against an England average of £292,095 for the same month (HM Land Registry UK House Price Index, May 2026, subject to change). A typical London home is worth close to twice a typical home elsewhere in England, and that gap is what shifts the planning conversation here. Figures on this page are current as at July 2026 and are subject to change.
Where London estates sit against the allowances
Inheritance tax is charged at 40% on the part of an estate above the available tax-free thresholds. Everyone has a nil-rate band of £325,000, and a residence nil-rate band of up to £175,000 where a home passes to children or grandchildren, so a single person can pass on up to £500,000 and a married couple or civil partners up to £1,000,000 (gov.uk, as at July 2026, subject to change). Those bands, and the £2,000,000 taper threshold below, are frozen until the end of the 2030 to 2031 tax year, on 5 April 2031, after the freeze was extended by a further year at the Autumn Budget of 26 November 2025 (gov.uk, as at July 2026, subject to change), while London values have been well above the England average for years.
Set the thresholds against the local figures and the picture is specific to London. At £544,814, the average London home on its own clears the £500,000 that a single owner can pass on with the residence band, and it uses up most of the £1,000,000 available to a couple before any pension, investment or business interest is added. In the prime central boroughs the numbers are firmly in taxable territory: the average home in Kensington and Chelsea was £1,255,567 in May 2026 (HM Land Registry UK House Price Index, May 2026, subject to change), which exceeds the full £1,000,000 couple allowance before the rest of the estate is counted.
| Figure | Amount (May 2026) |
|---|---|
| Average home, London | £544,814 |
| Average home, Kensington and Chelsea | £1,255,567 |
| Average home, England | £292,095 |
| Single-person allowance with residence band | £500,000 |
| Couple allowance with residence band | £1,000,000 |
Sources: HM Land Registry UK House Price Index and gov.uk/inheritance-tax, as at July 2026, subject to change.
One point worth noting for London specifically: over the year to May 2026, average London prices were down about 3.7%, while England as a whole rose about 2.3% (HM Land Registry UK House Price Index, May 2026, subject to change). The fall was sharper in the prime central boroughs: Kensington and Chelsea was down about 10.7% over the same year, from £1,405,728 in May 2025 to £1,255,567 in May 2026 (HM Land Registry UK House Price Index, May 2026, subject to change), yet even after that fall the average home there still sits above the full £1,000,000 couple allowance. A softer market does not lift an estate back under the thresholds when those thresholds are themselves frozen, now for a further year to 5 April 2031, and a valuation for probate is taken at the date of death rather than at the peak, so the planning question does not go away in a flat year.
The residence band taper above £2,000,000
For higher-value London estates the residence nil-rate band is not a fixed £175,000. It tapers away by £1 for every £2 by which an estate exceeds £2,000,000 (gov.uk, as at July 2026, subject to change). On a single estate the £175,000 residence band is reduced to nothing once the estate reaches £2,350,000, and for a couple carrying two residence bands the combined £350,000 is fully tapered away by £2,700,000. In parts of London where a family home, a pension and some investments together pass £2,000,000 without much difficulty, the residence band people assume they have may be partly or wholly gone.
This is the trap the headline £1,000,000 couple figure hides. That figure only holds while an estate stays below the taper. A household that reads £1,000,000 and stops there, without checking where their total estate sits against the £2,000,000 line, can plan around an allowance they no longer fully have. Working out the real position, in our experience, tends to start with an honest total of the estate rather than with the home alone, because in London the home is often only part of what tips the balance.
In prime London the useful question is rarely "is there a tax charge?" but "which allowances still reach this estate, and what has the taper already taken away?"
Domicile and cross-border estates
London draws residents and property owners from across the world, and that raises questions most inland towns rarely meet. Liability to inheritance tax turns on more than where a home sits. Whether a person is treated as a long-term UK resident for these purposes affects how much of their worldwide estate falls within the UK charge, following the move to a residence-based test from 6 April 2025 (gov.uk, as at July 2026, subject to change). Assets held abroad, a spouse with a different connection to the UK, and property in more than one country each add a layer that a standard will does not settle on its own.
None of this is unusual for a London household, but it is the kind of position where general information stops being enough and specialist advice earns its place. Where an estate touches more than one country, many families take advice in each relevant jurisdiction, because a will valid here may not carry the same effect elsewhere, and the interaction between two tax systems can change the outcome.
Trusts, lifetime gifts and business relief
Once an estate is clearly above the thresholds, the planning tools that matter shift. Trusts can let people set aside assets for children or grandchildren with control over how and when they receive them, which is often a concern where the sums are large. Lifetime gifts made more than seven years before death can fall outside the estate, subject to the rules and to keeping records (gov.uk, as at July 2026, subject to change). Where a London estate includes a trading business or qualifying shares, business relief may apply, though the rules are changing: from 6 April 2026 each person has a £2,500,000 allowance at 100% relief for combined qualifying agricultural and business property, with 50% relief above that, and because this allowance is transferable between spouses and civil partners a couple can pass on up to £5,000,000 of such assets, on top of the nil-rate bands, before this relief runs out (gov.uk, 23 December 2025, subject to change).
These are options, not recommendations. Which of them fits depends on the whole estate, the family, and what the taper has left in play, and each carries trade-offs that only make sense once the full position is on the table. We look at the documents and the numbers together, with one point of contact, because for a larger London estate the drafting and the tax rarely sit apart. You can see how fees are agreed on our pricing page and start a conversation through our contact page.