IHT and Cryptocurrency UK: Inheritance Tax on Bitcoin and Digital Assets (2026)
Bitcoin, Ethereum, NFTs, and all other cryptoassets are property for inheritance tax. HMRC includes them in the estate at their market value on the date of death. The biggest risk is not the IHT — it is executors who cannot access the assets because no one documented the seed phrases.
IHT Rules for Cryptocurrency and Digital Assets
Cryptocurrency is property for IHT: HMRC's position
HMRC treats cryptoassets as property for inheritance tax purposes. The Cryptoassets Manual (CRYPTO10500 and CRYPTO10300) confirms that tokens (including exchange tokens such as Bitcoin and Ethereum, utility tokens, and security tokens) are property in the ordinary legal sense — they are chargeable assets for capital gains tax and are included in the IHT estate. NFTs (non-fungible tokens) are also property for IHT. Stablecoins, DeFi protocol tokens, and tokens held in liquidity pools are all treated the same way. There is no special IHT relief or exemption for cryptoassets — they receive no equivalent of Agricultural Property Relief or Business Property Relief (unless, in rare cases, a crypto business qualifies for BPR as a trading business). The entire value of the cryptoasset portfolio is included in the estate at the open market value on the date of death.
Valuing cryptocurrency for IHT: the date-of-death price
Cryptocurrency must be valued at its market value on the date of death (s160 IHTA 1984 — open market value). This is the price at which the asset could reasonably be expected to change hands between a willing buyer and willing seller. For exchange-traded tokens (Bitcoin, Ethereum), the market value is straightforward: the spot price on a major exchange (e.g. Coinbase, Binance, Kraken) at the time of death. HMRC accepts the closing price on the date of death from a recognised exchange. The executors should take a screenshot or record from a reputable exchange showing the price at or around the death date. The price should be consistent across multiple exchanges — if not, the average is typically used. For NFTs and illiquid tokens, valuation is more complex: secondary market price if traded, or a specialist valuation for unique NFTs. Volatility means the IHT valuation may differ significantly from the value when executors eventually sell the assets to pay tax.
Wallet access: the practical risk for executors
The most significant practical challenge with crypto inheritance is access. Cryptocurrency is controlled by private keys (seed phrases). Without the seed phrase or private key, the assets are effectively inaccessible — permanently. Unlike a bank account, there is no central authority to approach for access. If the deceased held crypto on an exchange (custodial account), executors can contact the exchange with a death certificate and grant of probate (or confirmation in Scotland) to request access to the account. The exchange will typically freeze the account and require a formal probate process before releasing funds. If the deceased held crypto in a self-custody wallet (hardware wallet, software wallet), the executor must find the seed phrase or private key — typically a 12 or 24-word recovery phrase written down or stored on a physical device. If this cannot be found, the assets are lost. A responsible digital legacy plan stores seed phrases securely, with instructions to the executor — but not in the will itself (wills become public documents on probate and seed phrases must remain confidential).
Documenting crypto in a will and estate plan
The will should acknowledge that cryptoassets exist and direct them to specific beneficiaries — but it must not include seed phrases or private keys (these would become public on probate). The correct approach: (1) Keep a secure record of all crypto holdings — exchange accounts, wallet addresses, and seed phrases — in a document or password manager accessible to the executor but not in the will. (2) Store hardware wallets and seed phrase backups securely (fireproof safe, safety deposit box). (3) Leave a letter of wishes with the will explaining where to find digital assets and access instructions. (4) Tell your executor where to find the access information — they must know it exists without it being written in the will. (5) Review and update the crypto documentation regularly as holdings change. Executors should also check for crypto by reviewing bank statements (for exchange purchases), email accounts (for exchange account confirmation emails), and any hardware wallets found in the deceased's possessions.
IHT planning for crypto holdings
Standard IHT planning tools apply to cryptoassets: (1) Lifetime gifts of crypto are PETs — the 7-year clock starts on the transfer date. CGT may also apply on the gift (crypto is a chargeable asset for CGT; gifting is a disposal at market value on the transfer date). (2) Annual exemptions (£3,000/year) apply to crypto gifts as to any other asset. (3) There is no gift with reservation trap for crypto — unlike a house you continue to use, you cannot retain a reservation over a transferred wallet. But associated operations rules could apply if the donor retains practical control. (4) Crypto does not qualify for BPR as an investment asset — even if held for many years. (5) If held through a company that trades in crypto or blockchain services, the company shares may qualify for BPR — but HMRC will scrutinise the trading test. (6) Writing crypto into a discretionary trust is a CLT — the trust becomes the registered holder (or custodian holder on an exchange). Periodic charges apply. There is no IHT advantage to holding crypto in a trust unless the overall estate planning benefits the structure.
NFTs, DeFi, and staking rewards: special considerations
NFTs are included in the IHT estate as property at death value. Valuing an NFT is complex — floor price of the collection, rarity multipliers, and recent sales of comparable NFTs are all relevant. HMRC does not provide specific guidance on NFT valuation beyond the general open market value rule. DeFi (Decentralised Finance) positions — liquidity pool tokens, staking positions, locked tokens — are more complex. Tokens locked in a protocol or staking contract may have a market value but be inaccessible immediately. HMRC's position is that the market value on death applies regardless of lock-in periods. Executors should document all DeFi positions and obtain valuations. Staking rewards accrued but not yet paid out may also be included — they are income of the estate post-death if accruing after death, or estate assets if accrued before death. Airdropped tokens, forked coins (e.g. Bitcoin Cash from a Bitcoin fork), and rewards tokens should also be documented and valued.
Frequently Asked Questions
Is Bitcoin subject to inheritance tax in the UK?
Yes. Bitcoin and all other cryptoassets are treated as property for IHT by HMRC. The full market value of all crypto holdings on the date of death is included in the estate and may be subject to IHT at 40% above the available nil rate band (£325,000). There is no special IHT exemption for cryptocurrency.
How is cryptocurrency valued for inheritance tax?
At the open market value on the date of death — the spot price on a major exchange (Coinbase, Binance, Kraken) at the time of death. Executors should record the price from a reputable exchange at or close to the time of death. NFTs and illiquid tokens require a specialist valuation. Volatility means the death-date value may differ significantly from what the assets are worth when eventually sold.
What happens to cryptocurrency when someone dies if the executor can't find the password?
The assets may be permanently inaccessible. Cryptocurrency held in self-custody wallets (hardware wallet, software wallet) requires the seed phrase (12 or 24-word recovery phrase) or private key to access. Without it, no authority can recover the assets. Exchange-held crypto (Coinbase, Binance) can be claimed via a formal probate process. To avoid this, every crypto holder should document their holdings and access credentials in a secure location known to their executor — but not in the will itself (wills become public on probate).
Can I give cryptocurrency as a gift to reduce inheritance tax?
Yes — a gift of cryptocurrency to another individual is a Potentially Exempt Transfer (PET). If you survive 7 years, it is fully exempt from IHT. Note: the gift is also a disposal for capital gains tax purposes — if the crypto has risen in value since you acquired it, CGT may be payable on the gift at market value on the date of transfer (less your acquisition cost and annual CGT exemption). The annual IHT exemption (£3,000/year) can also be used for crypto gifts, as for any other asset.
Does cryptocurrency qualify for Business Property Relief?
No — cryptoassets held as investments do not qualify for BPR. They are treated as investment assets, not business property. BPR applies to trading businesses and interests in trading partnerships, not to investment portfolios (including crypto). If an individual runs a business in the crypto sector (crypto trading firm, blockchain services company) and holds shares in that trading company, the shares may qualify for BPR — but HMRC will apply the trading test strictly.
Document Your Digital Assets in Your Will Plan
Your will should direct your cryptocurrency to specific beneficiaries — but access credentials must be documented separately. WillSafe will kits for England and Wales include guidance on planning for digital assets: what to include in the will, what to keep separate, and how to leave instructions for your executor.
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