"They are gracious and natural and yet able to really connect," a source tells PEOPLE

Kate Middleton and Prince William stole the spotlight at Queen Elizabeth‘s Buckingham Palace last week, making it clear that they are ready for the next step on their royal journey.

Entering the glittering palace ballroom behind the monarch and Prince Charles and Camilla, Duchess of Cornwall, Kate and William mingled expertly with partygoers at the Dec. 11 reception for diplomats.

“They combine grace and regal presence with a lovely human touch,” a guest who attended the annual bash tells PEOPLE in this week’s cover story. “They are gracious and natural and yet able to really connect.”

The future King and Queen, who have been married for eight years, are honing their expertise as they go.

“They are being prepared every day,” says royal biographer Ingrid Seward. “There was no school for princesses when Princess Diana was around, and there is no school today for monarchs. They learn by observing and by experience.”

duke and duchess of cambridge
Kate Middleton and Prince William on the cover of PEOPLE.

Their teamwork was also on display during the couple’s triumphant tour of Pakistan in October.

“They are a great double act,” says a senior royal source. “People make much of William giving the big speeches, but Kate is there too, asking questions of presidents and their wives. These things are easier when they are side by side.”

For more on how Prince William and Princess Kate are making new strides in their royal work, pick up a copy of PEOPLE on newsstands on Friday.

Increasing travel and work commitments bring added pressures on their own family, especially as older children Prince George, 6, and Princess Charlotte, 4, are more aware of their parents’ away time. (Little Louis is 19 months.) And occasionally, something’s got to give. Kate recently had to cancel an appearance with William at an evening event for the Tusk Conservation Awards because of a childcare issue. A source close to the royal household says, “That is good for other mothers out there.”

Duchess of Cambridge
Kate Middleton
| Credit: Victoria Jones/PA Wire
Duke of Cambridge
Prince William
| Credit: Victoria Jones/PA Wire

Next week, the family of five will spend Christmas with the Queen at her Sandringham estate in Norfolk. While Prince Harry and Meghan Markle have opted to spend the holiday apart from the royal family, William and Kate will take their place alongside the Queen for their annual church walk — with George and Charlotte possibly making their Christmas Day debut as well.

They are also preparing for a busy year ahead. The couple are expected to go abroad on at least two overseas visits and continue with their efforts at home in the U.K. promoting mental health initiatives and supporting families with young children.

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As they near 40, both royals are also keenly aware of the passage of time — and how much closer it brings them to the throne.

“The monarchy is approaching a very challenging period of change,” says royal historian Robert Lacey. “Charles is going to have his work cut out coping with the transitions. It’s good to have that reassurance in the new generation that there is someone stepping up to the plate.”