Inheritance Tax on Cryptocurrency UK: HMRC Rules and IHT400 Guide
Cryptocurrency is property for UK tax purposes. When a person dies holding Bitcoin, Ether, NFTs, or any other digital asset, those holdings form part of their estate and can attract inheritance tax at 40%. This guide covers the HMRC rules, how executors should value and report crypto, common access problems, and the planning options available.
HMRC’s Position: Crypto Is Property
HMRC’s Cryptoassets Manual (CRYPTO) is clear: “Cryptoassets are a type of cryptographically secured digital asset which uses some type of distributed ledger technology (DLT). They are intangible assets — they are not money, they are not currency, and they are not securities.” They are, however, property — and as property, they are subject to all UK taxes including capital gains tax, income tax, and inheritance tax.
For inheritance tax purposes, the position is the same as for any other asset in the estate: the executor or administrator must:
- Identify all cryptocurrency holdings at the date of death
- Value each holding at its market price at the date of death
- Include the total value in the IHT400 estate return
- Pay IHT at 40% on the total estate value above the available nil-rate band
Note on situs: For domiciled UK residents, worldwide assets (including crypto held on foreign exchanges) are included in the IHT estate. The situs of crypto is generally considered to be the residence of the beneficial owner — for a UK-domiciled person, crypto held anywhere in the world is UK-situated for IHT purposes.
Types of Cryptoasset and IHT Treatment
| Asset type | Examples | IHT treatment | Valuation approach |
|---|---|---|---|
| Exchange tokens | Bitcoin (BTC), Ether (ETH), Litecoin | Chargeable property — included in estate | Mid-market price on recognised exchange at date of death |
| Utility tokens | Platform access / service tokens | Chargeable property — included in estate | Market price if traded; nominal if not |
| Security tokens | Tokenised equity or debt | Chargeable property — potentially BPR on underlying if qualifying | Value of underlying right |
| NFTs | Digital art, gaming assets, collectibles | Chargeable property — included in estate | Most recent comparable sale; specialist valuation if no market |
| DeFi positions | Staking rewards, LP tokens, yield | Chargeable — value of underlying tokens at death | Value of tokens at time of death; accrued rewards included |
The Executor’s Responsibilities
Dealing with cryptocurrency in an estate is more technically demanding than dealing with a bank account. The executor’s duties include:
Identify all holdings
Check for exchange accounts (Coinbase, Binance, Kraken, etc.), hardware wallets (Ledger, Trezor), software wallets, and paper wallets. Review browser bookmarks, email confirmations, and 2FA apps on the deceased's devices. Bank statements may show fiat-to-crypto transfers that indicate exchange accounts.
Secure the assets
Do not attempt to move or liquidate holdings until probate is granted. Secure access to any wallets or accounts discovered. Note that cryptocurrency on exchanges is held as a custodial asset — the exchange holds the private keys on the estate's behalf. Directly held wallet crypto requires the seed phrase or private key.
Establish date-of-death values
For each holding, record the mid-market price at the close of business on the date of death (or the next business day if the death fell on a weekend). Use a recognised exchange's historical data and document the source. For NFTs or illiquid tokens, document the methodology and the best available evidence of value.
Report on IHT400
Crypto holdings are reported as an asset of the estate on IHT400. Depending on their nature, this may be in the household and personal goods section (IHT407) or as a separate unlisted/digital asset. Seek professional advice if the estate is taxable and crypto forms a significant part of the value.
Consider Capital Gains Tax on disposal
If the executor or administrator sells cryptocurrency during estate administration, or if beneficiaries later sell inherited crypto, CGT may apply. The base cost for beneficiaries is the probate value (market value at death) — this is the death uplift. No CGT arises on pre-death gains. Sales above probate value are subject to CGT at 18% or 24% (2024 rates).
The Critical Access Problem
Cryptocurrency that is not held on a custodial exchange is controlled by private keys. Without the private key or 12/24-word seed phrase, no one — not the executor, not the courts, not the exchange — can access the wallet. This creates a serious planning issue: if a crypto holder dies without leaving accessible instructions for their executor, the assets may be permanently lost.
Never put private keys in your will.
A will is a public document after probate — anyone can obtain a copy. Including private keys in your will exposes your crypto to immediate theft. Instead, prepare a separate secure document (letter of wishes) with access instructions stored in a safe, fireproof box or with a trusted solicitor — separate from the will itself.
For crypto held on custodial exchanges, the executor can access funds by following the exchange’s bereavement process, which typically requires a death certificate and grant of probate. Major exchanges have established bereavement teams and policies for this purpose.
IHT Planning for Crypto Holdings
Options for reducing the IHT on cryptocurrency are more limited than for business or agricultural assets, but the following strategies are available:
- Annual gift exemption (£3,000 per year). You can transfer up to £3,000 of crypto (by value) per tax year entirely outside the IHT rules. Unused exemption from the prior year can be carried forward once.
- Potentially exempt transfers. Gifts of crypto above the annual exemption are potentially exempt transfers. If the donor survives seven years from the date of the gift, the value falls completely outside the estate. Taper relief applies for deaths in years three to seven.
- Spouse / civil partner exemption.Transfers of crypto to a UK-domiciled spouse or civil partner are completely exempt from IHT — at any amount, in life or on death. This preserves the NRB for the surviving spouse’s estate.
- Charitable legacy. Leaving 10% or more of the net estate (including crypto) to charity qualifies the estate for the reduced IHT rate of 36% rather than 40% on the remaining taxable estate.
- Life insurance in trust. Taking out a whole-of-life policy written in trust for the beneficiaries means the payout bypasses the estate and is not subject to IHT. This gives beneficiaries the cash to pay the IHT bill without having to sell crypto in an unfavourable market.
- Note: no Business Property Relief. Cryptocurrency does not qualify for BPR (which requires a qualifying business interest or unquoted trading company shares). NFTs and DeFi holdings are similarly ineligible.
Include Crypto in Your Will — and Your Letter of Wishes
Your will should include cryptocurrency as part of your estate and indicate who should inherit it. You can leave crypto as a specific gift (e.g., “all my cryptocurrency holdings to X”) or as part of your residuary estate.
Alongside your will, prepare a separate, securely stored letter of wishes that:
- Lists the exchanges, wallets, and platforms where your crypto is held
- Explains how your executor can access each (without including the private key in the will)
- Stores the seed phrase or hardware wallet PIN in a sealed envelope in a fireproof safe
- Tells your executor where the access instructions can be found
Frequently Asked Questions
Is cryptocurrency subject to inheritance tax in the UK?
Yes. HMRC treats cryptocurrency (exchange tokens such as Bitcoin and Ether, utility tokens, security tokens, and NFTs) as property for all tax purposes, including inheritance tax. When a person dies holding cryptocurrency, the holdings form part of their estate and are valued at market price at the date of death. The standard IHT rules apply: 40% tax on the value of the estate above the nil-rate band (£325,000 in 2026, frozen to 2030) plus any available residence nil-rate band. The crypto holdings are aggregated with all other estate assets before calculating IHT.
What happens if the executor cannot access the deceased's crypto wallet?
If the executor cannot access the deceased's cryptocurrency — because they did not leave the private key, seed phrase, or hardware wallet PIN — the coins are effectively lost. There is no central authority that can recover access, and no estate administrator has any special legal right to demand access from a blockchain. The loss does not eliminate the IHT liability: if the executor is aware of the holdings but cannot access them, they should still declare the estimated value on IHT400 and seek a reduction claim if the assets remain irrecoverable. This is why crypto holders should include secure access instructions in a letter of wishes stored separately from the will — not in the will itself, which becomes public after probate.
How do I value cryptocurrency for IHT400 purposes?
The executor must record the market price of each cryptocurrency holding at the exact date of death (or the next available working day if markets were closed). For exchange-listed tokens (Bitcoin, Ether, etc.) use the mid-market price from a reputable exchange on the date of death. For multiple holdings, value each coin separately. For staking rewards or DeFi positions, value at the fair market value of the underlying tokens at death. Executors should document the source of the price used (e.g., the exchange's historical price data). For NFTs, valuation is more complex — obtain the most recent comparable sale price for a similar NFT, and if no comparable exists, a professional digital asset valuation may be needed. Record the methodology used.
Does business property relief apply to cryptocurrency?
No — business property relief (BPR) does not apply to cryptocurrency. BPR at 100% is available for shares in qualifying unquoted trading companies and certain business interests. Cryptocurrency is a financial asset, not a business, so it does not qualify. There is no equivalent relief specifically designed for crypto holdings. The only IHT exemption that commonly applies is the spouse/civil partner exemption (transfers between spouses are exempt regardless of value) and the annual gift exemption (£3,000 per year) for lifetime gifts of cryptocurrency. A seven-year gift of cryptocurrency to a non-exempt beneficiary would count as a potentially exempt transfer — if the donor survives seven years, it falls outside the estate entirely.
Is there any IHT planning that can reduce the inheritance tax on cryptocurrency?
Yes, though options are more limited than for business or agricultural assets. Effective planning options include: (1) lifetime gifts under the annual exemption (£3,000 per year) — transfer small amounts of crypto tax-free annually; (2) potentially exempt transfers — larger gifts that become exempt if you survive seven years, subject to the seven-year rule and taper relief; (3) transfer to spouse or civil partner — exempt from IHT at any amount, passing any NRB entitlement to the surviving partner; (4) charitable legacy in your will — reducing the estate below key thresholds or qualifying for the 10% charity rate of 36%; (5) life insurance written in trust — cover the expected IHT liability so beneficiaries can pay the bill without selling the crypto in a falling market. There is no equivalent of pension planning, agricultural relief, or business relief for crypto holdings.
Make Sure Your Will Covers Your Digital Assets
A WillSafe will kit lets you name your crypto holdings and choose who inherits them. Pair it with a secure letter of wishes containing your access instructions — and your executor will have everything they need.