A crypto holding can be easy to buy. It can be hard for an executor to find, value and access after death.
A missing device, unclear exchange records, or an exposed seed phrase can delay probate. The estate may need cash to meet a tax bill.
Early and orderly planning protects the assets and the people responsible for them.
In England, cryptoassets are usually part of a deceased person’s estate for Inheritance Tax. HMRC uses their market value on the date of death.
The challenge with Inheritance Tax on crypto estates is proving what exists. Executors must secure lawful access and fund tax before any sale.
Clear records, sound values, a cash plan, and secure succession plans help. They also separate IHT from later Capital Gains Tax.
Crypto in an estate can face UK inheritance tax
Cryptoassets owned by someone who dies usually form part of their estate for Inheritance Tax. This applies to assets on exchanges, phone wallets, and hardware wallets.
Crypto does not become tax-free because it is digital. Think of it like cash in a locked safe.
The tax position usually depends on who truly owned the crypto at death. It does not depend only on where a wallet was stored.
When does the 40% rate apply?
The 40% rate usually applies to estate value above the available nil-rate band. Valid reliefs and exemptions can reduce the amount charged.
A married couple may pass an unused nil-rate band to the survivor. This can take their combined allowance to £650,000.
The residence allowance can be worth up to £175,000 per person in suitable cases. It does not apply just because an estate includes crypto.
Does self-custody change the tax result?
Self-custody means the owner holds private keys instead of leaving assets with a crypto exchange. It does not usually change the Inheritance Tax result.
The key question is beneficial ownership. This means the person truly owned the assets and benefited from them.
That can apply even if a wallet used another email address. A common mistake is treating wallet registration as proof of ownership.
Gifts and the seven-year rule
Crypto gifts to an individual are often potentially exempt transfers. Their value may fall outside the donor’s estate if the donor survives seven years.
The wider IHT rules still apply. The transfer must also be real.
Keeping the private key may show that the donor kept control. The same risk can arise with multisignature control or continued staking rewards.
Expecting the recipient to return the crypto can also show that no full gift occurred. A gift must leave the recipient with real control.
Good UK crypto estate planning records the transfer date and sterling value. It should also record the transaction hash and wallet addresses.
Keep a recipient acknowledgement and details of custody arrangements. A lifetime gift can also be a disposal for Capital Gains Tax.
IHT treatment should not be assessed alone. A crypto tax adviser can check both taxes before a large gift.
Situs and HMRC reporting for cryptoassets
The situs of cryptoassets can matter for UK Inheritance Tax, particularly where the deceased was non-UK domiciled or non-UK resident.
It can also matter where assets sat on an overseas platform. HMRC has generally said exchange tokens sit where their beneficial owner lives.
That differs from the location of a blockchain node, wallet device, or exchange. HMRC’s view is guidance, not a full answer for every asset or ownership set-up.
Executors should identify the deceased’s domicile and residence position. They should list overseas exchanges and wallets.
They should disclose crypto holdings in the relevant estate report. A foreign exchange account alone does not put assets outside HMRC’s reach.
Executors need evidence for each crypto valuation
Executors should build a crypto asset register before they transfer, swap, or sell anything. This register is the estate’s working map.
It should show what exists, where it sits, and how ownership is proved. It should also record the date-of-death value.
Good evidence can prevent a later dispute with HMRC or beneficiaries.
What should the executor search for?
Search for exchange accounts, hardware wallets, old phones, and password managers. Check recovery devices and two-factor authentication apps.
Look for emails from exchanges and bank payments to platforms. Check QR codes, wallet addresses, and tax reports.
Do not ask a relative to type a seed phrase into a website. That can give a thief full control of the wallet.
Use this working checklist:
- List every known exchange, account email, wallet address, and hardware device.
- Keep screenshots, statements, and transaction exports with visible dates.
- Record each token balance at the date and time of death.
- Keep seed phrases and private keys away from the estate file. Restrict access.
- Ask each exchange which grant, identification, and executor documents it needs.
- Log every action, including failed searches and locked accounts.
A clear search log can be as useful as a successful search. It shows that the executor acted with care.
How should different holdings be valued?
A sound valuation needs a reliable market price. It also needs proof of the number of units owned.
Keep exchange prices from the relevant time and the trading pair record. Keep wallet balance evidence and the sterling conversion method.
Thinly traded NFTs need extra care. Their screen price may not reflect a price achieved in a real sale.
Locked staking positions and decentralised finance holdings may also need specialist evidence. Access limits can affect their real market value.
| Holding or custody | Core evidence | Date-of-death value | Access risk |
|---|
| Bitcoin or altcoins on exchange | Account statement and balance export | Platform price at death timestamp | Account freeze and probate checks |
| Hardware or software wallet | Address, device record, and transaction trail | Independent market price at death | Lost key or seed phrase |
| Stablecoins | Token balance and issuer details | Market value, not assumed £1 | Depeg or redemption limits |
| NFTs | Token ID, collection, and ownership trail | Comparable actual sales where available | Low liquidity |
| Staking or DeFi tokens | Protocol position, lock terms, and rewards | Net accessible market value | Lock-up, smart contract, or pool risk |
A date-of-death value must reflect what the estate owned at that time. It should not assume later price rises or falls.
Pay IHT safely when crypto is volatile or locked
Inheritance Tax is usually due by the end of the sixth month after death. This applies even if no crypto sale has happened.
That deadline can create a cash problem for crypto-heavy estates. The asset may be valuable but hard to access.
For a crypto-heavy estate, value first, preserve evidence second, and arrange tax funding third. Selling before authority is clear can break platform rules. It can also create a poor audit trail. If access is certain and the estate lacks cash, a documented sale may be needed. If access is uncertain, seek probate and tax advice early. Do not assume the six-month deadline will move.
Should executors sell bitcoin to pay tax?
Inheritance Tax measures the estate’s value at death. Later price changes do not alter that original IHT value.
Capital Gains Tax can arise later if personal representatives sell inherited crypto above its probate value. Beneficiaries can also face CGT after receiving crypto.
Under the Taxation of Chargeable Gains Act 1992, the probate value usually starts the later gain calculation. Think of it as a new starting line after death.
This works well in theory, but access can be the real problem. An executor should not rush into a sale without clear authority.
Keep keys out of the will
A seed phrase is usually a list of words. It can recreate a wallet and move its assets.
Never put it in a will, email, shared spreadsheet, or probate application. Wills can become available during probate.
Treat a seed phrase like the only key to a safe. The will should explain the succession plan, not reveal the key.
Worked IHT and liquidity example
Assume a single person dies with £500,000 of quoted investments and cash. They also hold Bitcoin worth £300,000 at death.
With no transferable nil-rate band, spouse exemption, residence allowance, or other relief, the estate is worth £800,000. The £325,000 nil-rate band leaves £475,000 potentially chargeable.
At 40%, this produces IHT of £190,000. The executor must plan for that £190,000 bill.
This remains true if most value sits in volatile crypto. A price fall after death does not rewrite the original IHT value.
If Bitcoin later sells for £340,000, the £40,000 rise is considered separately for Capital Gains Tax. It does not alter the original IHT valuation.
What people ask
Does crypto count for inheritance tax in the UK?
Yes, crypto usually counts if the deceased beneficially owned it at death. Its market value then joins the rest of the estate for IHT.
Can HMRC track crypto held in a private wallet?
HMRC may find crypto through exchange data, bank records, tax returns, blockchain analysis, and estate evidence. Self-custody does not remove reporting duties.
What happens if the deceased's seed phrase is lost?
The asset may still need consideration in the estate if recovery seems unlikely. Executors should record searches, ownership evidence, and the inability to access it.
They should then seek specialist advice on value and reporting. Lost access does not automatically mean no estate disclosure.
Do beneficiaries pay tax when they sell inherited crypto?
They may pay CGT if they sell above the probate value. Their own tax position can affect the amount due.
The usual comparison is sale proceeds against the date-of-death value. It is not the deceased’s old purchase price.
Can I give crypto away to avoid inheritance tax?
A real gift can fall outside IHT if you survive seven years. Retained control can defeat the plan.
Record the date, value, wallet transfer, and the recipient’s independent control. A gift may also trigger Capital Gains Tax.
Should private keys go in my will?
No, private keys and seed phrases should not go in a will. The will may be seen during probate.
Keep access material in a separate secure arrangement. Let the will refer only to the succession plan.
Can an executor trade crypto while probate is ongoing?
An executor should not trade casually before checking legal authority and platform rules. A necessary sale needs a clear estate purpose and supporting records.
It should also have proper approval. Keep a record of the reason, price, and sale date.
What if crypto is locked in staking or DeFi?
Locked tokens can still form part of the estate. Access and value may be harder to prove.
Record lock dates, withdrawal penalties, protocol terms, and the claim value at death. Specialist advice may be needed for substantial DeFi holdings.
This guidance is not enough for estates with non-UK domicile, overseas assets, trusts, business or agricultural relief claims, contested probate, insolvency, lost keys, major DeFi arrangements, or unclear beneficial ownership. It is also less relevant where the deceased held no cryptoassets. The same applies where a regulated adviser already manages the estate. These facts can change both the tax result and probate steps.
A secure crypto estate plan prevents avoidable delays
The practical aim is simple. Executors should find the crypto, support its date-of-death value, and fund tax when due.
They should then transfer assets without exposing private keys. Clear records can reduce delay at a difficult time.
For a substantial holding, ask a solicitor with England and Wales probate experience to review the plan. Ask a UK crypto tax adviser to check the tax position too.
A secure succession plan keeps access details separate from the will. It gives executors enough guidance without giving strangers the keys.
