A death involving Bitcoin can leave executors facing urgent tax and access issues. They must identify holdings, secure wallets, support the date-of-death value, and plan for IHT before any disposal.
Inheritance Tax on Bitcoin Estates applies even when nobody can access the wallet. Later price movements may create a separate Capital Gains Tax position for the estate or beneficiaries.
HMRC includes bitcoin in the estate for IHT
Bitcoin is normally estate property for IHT. This applies to Bitcoin held on an exchange, hardware wallet, or paper backup.
The estate’s Bitcoin holdings are valued at death. IHT is commonly charged at 40% above available allowances.
Bitcoin can remain taxable even when access is lost.
The spouse exemption can remove IHT
Transfers to a qualifying spouse or civil partner are usually IHT-exempt. Domicile, overseas assets, and uncertain ownership can change the result.
Executors should confirm the facts before claiming this exemption. A spouse exemption may not work where domicile rules limit it.
An inaccessible wallet is not automatically nil
A missing seed phrase does not automatically make Bitcoin worthless for IHT. Executors should disclose known holdings and explain the access problem.
They should obtain valuation advice. They should not report zero without evidence.
For IHT, the starting point is Bitcoin’s open-market value at death. A later crash, rally, or sale price does not replace that figure. It may still affect how the estate pays the bill.
Executors should secure access before moving bitcoin
Executors should make a confidential inventory and preserve devices and records. They should avoid moving Bitcoin until they understand their authority.
Personal representatives must protect estate assets for beneficiaries. Think of a wallet like a sealed safe with a changing cash value.
Search without exposing recovery secrets
Record wallet addresses, device serial numbers, platform names, and sealed-instruction locations. Never enter a seed phrase on an unknown website.
Never send a seed phrase by email. Do not test it in an untrusted app.
Keep a chain-of-custody record
Document who found each device, when they secured it, and where it is stored. Relatives should not move coins to personal wallets.
Such moves damage the audit trail and may cause disputes. A frequent error is treating recovery words like an ordinary password.
Bitcoin estate: secure first, value second, distribute last
1. Locate
Accounts, devices, records
2. Secure
Preserve secrets offline
3. Value
Use date of death
4. Report
Plan IHT funding
Executors’ cryptocurrency duties extend beyond finding a visible exchange account. Personal representatives should search email accounts, password managers, tax returns, bank statements, and devices.
They should look for exchange confirmations, wallet addresses, and hardware-wallet records. They should then prepare a confidential digital-asset estate inventory.
For self-custody, a hardware wallet, seed phrase, passphrase, and PIN may be stored separately. Finding only one may not provide access to the Bitcoin wallet.
A multisignature arrangement needs the right number of signing keys. It also needs a clear recovery process.
Each device and backup should be sealed and photographed where suitable. Store each item securely and enter it in a chain-of-custody log.
Record an inaccessible crypto wallet as a known estate asset, even when recovery remains uncertain.
Date-of-death value sets IHT and later CGT
Executors should value each holding at market value on the date of death. Where possible, they should also record the time of death.
Record the BTC quantity, price source, time zone, and sterling conversion. These records support both probate and tax reporting.
IHT and CGT happen at different times
IHT applies to the estate at death. CGT can arise later when Bitcoin is sold, swapped, or given away.
Inherited Bitcoin usually takes the probate value as its CGT starting point. This is like recording a starting price before a later sale.
Paying tax before a sale needs care
IHT is generally due six months after the end of the month of death. A cash-short estate may need a controlled sale or other funding.
Executors should record any estate gain or loss from that sale. A sale price does not change the original IHT valuation.
| Event | Value used | Possible tax | Record needed |
|---|
| Death | Market value at death | IHT on estate value | Price source, time, BTC balance |
| Estate sells Bitcoin | Sale proceeds against probate value | Estate CGT may arise | Authority, trade receipt, fees |
| Beneficiary sells Bitcoin | Sale proceeds against probate value | Beneficiary CGT may arise | Probate valuation and sale record |
For a defensible valuation, record the exact BTC balance at death. Use one consistent, reputable market source where possible.
That source should show the trading pair, timestamp, and time zone. Bitcoin can trade at different prices across platforms.
Executors can keep prices from more than one major exchange. They should document a reasonable method, such as a same-time average in sterling.
Save screenshots, CSV exports, transaction IDs, and the GBP/USD rate used. These records support the IHT return and the probate value for CGT.
The market value at death should not be replaced by the eventual sale amount. A later sale may instead matter for estate Capital Gains Tax.
Gifts and overseas links can change the result
Lifetime gifts, trusts, and international links can alter Bitcoin planning. None gives an automatic escape from IHT.
Gifts can also create CGT at market value. The tax result depends on the facts and timing.
A spouse case with £480,000 of bitcoin
If £480,000 of Bitcoin passes fully to a qualifying UK-domiciled spouse, it is normally spouse-exempt. No IHT would usually arise on that transfer.
If it passes to adult children, only a £325,000 nil-rate band may be available. Then £155,000 may be taxable.
That suggests IHT of £62,000 at 40%. This example does not include any extra allowance.
Plan access separately from the will
Keep a valid will, a non-sensitive asset list, and a separate protected access plan. The list can name a hardware wallet location.
It should not reveal recovery words. Think of it as leaving directions to a safe, not its combination.
This general approach may not apply where the deceased was non-UK domiciled. It may also not apply where assets or beneficiaries are overseas. Trusts, companies, loans, DeFi holdings, staking, NFTs, multisignature wallets, or disputed ownership need specialist advice. Situs, probate jurisdiction, and tax treatment can differ. UK IHT may not govern someone whose tax position is ruled solely by another jurisdiction. Obtain advice from a solicitor, tax adviser, and crypto succession specialist before acting.
Bitcoin probate can become more complex with overseas links. The deceased, exchange, custodian, beneficiaries, or assets may each create an overseas link.
The cryptoasset situs and required probate jurisdiction may depend on the ownership structure. They may also depend on domicile and the platform contract.
An overseas exchange account may need evidence beyond a UK grant of representation. This issue matters when comparing different tax systems.
UK inheritance tax usually applies at death to the taxable estate. It is commonly 40% above available bands.
US federal estate tax has its own exemptions, filing thresholds, and US-situs property rules. Do not assume either system applies alone.
A UK-domiciled estate with international Bitcoin holdings may need coordinated UK and foreign advice. This helps avoid conflicting tax filings or access steps.
What people ask
Do you pay tax on inherited bitcoin?
Inherited Bitcoin may be subject to IHT within the estate. Inheritance itself usually does not trigger CGT.
What if nobody has the seed phrase?
Disclose the holding and document the recovery problem. Do not simply ignore it or report it as worthless.
Which bitcoin price is used for probate?
Use a supportable market price at death. Record the time, source, and Bitcoin quantity.
Can an executor sell bitcoin to pay IHT?
Yes, if authorised and properly documented. The sale can create estate CGT.
Is bitcoin inherited by a spouse free of IHT?
Usually, yes, for a qualifying spouse or civil partner. Domicile and ownership facts can change the result.
Does putting bitcoin in a trust avoid IHT?
No, a trust does not automatically avoid IHT. Trusts can create their own IHT and other tax charges.
Does a bitcoin wallet go through probate?
Yes, if the deceased owned the wallet. Executors need ownership evidence and secure access.
Is UK bitcoin inheritance tax the same as US estate tax?
No, UK IHT and US estate-tax rules differ. The differences can be large for international estates.
Act before access or value becomes uncertain
Treat the wallet like a sealed safe with contents that change value constantly. Preserve it, document it, and value it at death.
Then decide whether the estate should hold or sell Bitcoin. Seek specialist advice before moving coins where access, ownership, or tax facts are unclear.
