¿Te worried about how bitcoin and other cryptoassets will be taxed when someone dies or when a loved one inherits them? Many estates now include crypto, and misunderstanding valuation, reporting and executor duties can mean incorrect IHT returns, delays in probate and unexpected tax bills.
This guide gives a concise roadmap for Crypto Inheritance and IHT: how HMRC values bitcoin for IHT purposes, when crypto falls into the estate, capital gains implications for heirs, rules on lifetime gifts, practical steps to record keys and wallet access, and how to complete probate and HMRC reporting with examples and checklists.
Key takeaways: what to know in one minute
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Crypto is property for IHT and must be included on the estate valuation at the market value on the date of death. Evidence of value is essential.
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Date of death value matters: HMRC requires the fair market value on the date of death, typically the exchange rate or a consistent valuation method for decentralised holdings.
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Heirs may trigger capital gains when selling inherited crypto. The base cost for CGT is the market value at date of death.
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Gifts and lifetime transfers can reduce IHT but carry rules and potential anti-avoidance risks, and transfers within seven years of death may still be taxable.
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Executors must document private key access and exchange accounts; a clear wallet access plan avoids loss and speeds probate.
How HMRC values bitcoin for IHT purposes
HMRC treats cryptoassets as property. For IHT the estate must state the market value of each asset on the date of death. The key questions are: which market to use, what time point, and how to evidence the valuation.
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HMRC guidance on cryptoassets confirms they are property and subject to existing valuation rules; see the HMRC collection on tax on cryptoassets: HMRC: tax on cryptoassets.
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Valuation method: for liquid assets like bitcoin, the typical approach is the mid-market or exchange spot price on the date of death. For decentralised or illiquid tokens, a reasonable method (volume-weighted average, reputable aggregator, or recent trades) must be used and fully documented.
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Time of valuation: the date of death is normally decisive. If the market is volatile, a short window (for example, the average price across a few reputable exchanges within a 24-hour window) may be used, but the method should be applied consistently and justified.
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Evidence required: exchange statements, blockchain snapshots, third-party aggregator screenshots (CoinMarketCap, CoinGecko), contemporaneous snapshots from custodians, and signed declarations where needed. The more corroboration, the stronger the valuation.
What to do if bitcoin is split across wallets and exchanges
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Produce transaction history from each exchange (export CSV) and address-level transaction records from block explorers for self-custody wallets.
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Reconcile on-chain balances with exchange balances and convert each balance to GBP at the date-of-death rate using the chosen method.
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Keep a short note explaining the valuation choices and sources; attach screenshots or exported files to the estate papers.
Example: valuing 2.5 BTC at date of death
If the chosen method is the mid-market price on 2025-10-15 of £30,000 per BTC, then 2.5 BTC = 2.5 × £30,000 = £75,000. Document exchange name, URL, timestamp and a screenshot or CSV export.
When crypto is part of your estate: IHT rules
Cryptoassets owned by the deceased at death form part of the estate for IHT if they are part of the deceased's property and not specifically excluded by legal arrangements. Residence and domicile rules for IHT still apply to the estate, but the treatment of the asset remains consistent with property rules.
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If the deceased owned the private keys or had title to exchange accounts, the assets are part of the estate.
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Custodied assets (held by exchanges or custodians) may still be part of the estate if the deceased had beneficial ownership; contractual terms with custodians can influence access but do not automatically remove assets from the estate.
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Where crypto is held jointly, usual rules on jointly owned property apply—usually passing to the surviving joint owner outside probate, but documentation must be checked (e.g. joint tenancy vs tenancy in common).
Duties of the personal representative (executor or administrator)
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Identify all crypto holdings and gather documentary evidence: exchange accounts, wallet addresses, private key locations, multi-sig arrangements, staking/DeFi positions, and custody agreements.
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Value assets at the date of death and include them on the IHT account (IHT400) and estate inventory.
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Apply for probate only after ensuring adequate evidence is assembled; incomplete crypto evidence may delay the process.
Common probate traps with crypto
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Lost private keys: assets may be irrecoverable and cannot be included as estate property unless demonstrable evidence shows ownership and recoverability prospects.
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Custodian freezes: exchanges may freeze accounts pending legal orders; early contact with the platform together with probate documents is essential.
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Staked or locked assets: staking rewards that accrue after death may belong to the estate only if they are payable to the deceased's account; record the status at date of death.
Capital gains implications for heirs receiving bitcoin
When an heir receives crypto as part of inheritance, the base cost for Capital Gains Tax (CGT) is the market value on the date of death. This means future disposals by the heir are assessed for CGT against that base cost.
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Example: inherited 1 BTC valued at £40,000 on date of death. If the heir later sells at £60,000, the gain for CGT is £20,000 (sale price minus probate valuation), subject to annual CGT exemptions and rates.
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If the heir gifts inherited crypto later, the base cost for the disposal is normally the value on date of death, not the original deceased's acquisition cost, unless different reliefs apply.
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If the estate sells the crypto before distribution, any gain or loss will be realised by the estate and taxed accordingly; such gains may be accounted for in the estate accounts before distribution.
Dealing with small estates and CGT reporting
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Heirs who dispose of crypto and realise gains above the annual exempt amount must report via self-assessment or the real-time Capital Gains service where applicable.
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If an heir sells immediately at a very similar price to the date-of-death valuation, the practical gain may be minimal, but evidence of the original valuation must be retained.
Gifts, lifetime transfers and IHT on crypto
Lifetime transfers of crypto can affect IHT if the donor survives more than seven years or not. The rules follow standard IHT treatments for gifts with some crypto-specific practicalities.
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Potentially exempt transfers (PETs): a straightforward gift may become exempt if the donor survives seven years after the gift. If the donor dies within seven years, the taper relief and chargeable transfers rules apply as for other assets.
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Chargeable lifetime transfers (e.g. into certain trusts) may attract immediate or eventual IHT charges depending on the structure. Crypto placed into trusts must be valued at the date of transfer and properly documented.
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Anti-avoidance: HMRC will scrutinise arrangements designed purely to avoid IHT, particularly rapid transfers or transfers where beneficial ownership has not genuinely changed.
Practical steps when gifting crypto
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Document the transfer with a written deed or contemporaneous email: include wallet addresses, transaction IDs, timestamp, and a clear statement of intent to gift.
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For transfers between wallets controlled by the same individual, HMRC will regard the asset as still owned by that person—so the formal change of beneficial ownership matters.
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Keep copies of on-chain transactions and exchange withdrawal confirmations as evidence of the transfer.
Practical steps to record private keys and wallet access
Executors commonly fail because they cannot locate keys or prove ownership. A simple, secure recording process mitigates that risk.
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Create a written access inventory: list exchanges (with usernames and KYC names), wallet addresses, type of wallet (hardware, custodial, multisig), location of private keys or seed phrases, and contact details for custodians.
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Use a secure method to store the inventory: sealed envelope in a solicitor's file, a trust company, or a reputable digital vault. Avoid emailing seed phrases.
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Include a short how-to access note for executors explaining necessary steps (two-factor authentication, common recovery steps, multi-sig signers and contact details).
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For hardware wallets, note device model, storage location and PIN length (do not write full PIN where it could be easily misused). Consider a shared custody plan for high-value holdings.
Example step-by-step checklist for executors
- Locate the access inventory and check KYC names against death certificate.
- Contact custodial platforms with probate documents and request account freeze or transfer instructions.
- For self-custody, identify whether recovery phrases can be used safely; consider professional crypto-recovery services if keys are partially damaged.
- Record all steps, communications and transactions in the estate file.
Executor access flow for crypto estates
🔎 Step 1 → Locate inventory (sealed copy) ✅
📞 Step 2 → Contact exchanges & custodians (probate docs) ✅
🔐 Step 3 → Secure keys / access (avoid sharing) ✅
🧾 Step 4 → Value assets at date of death (document sources) ✅
📦 Result → Clear estate inventory & faster probate ✅
Executors must include crypto on the IHT account and, where necessary, IHT400. The same supporting documentation principles apply as for other assets: corroborate values and ownership.
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Forms and guidance: the principal IHT form for most estates is IHT400 and IHT account (IHT400 guidance). HMRC also provides guidance on what to include in the estate inventory.
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Reporting sequence: prepare the estate inventory (including crypto), value all assets, complete the IHT forms, pay any IHT due and then apply for probate. For complex crypto positions consider a provisional valuation and agree approach with HMRC early to avoid later disputes.
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If the estate sells crypto before distribution, the gains or losses belong to the estate and should be reflected in accounts and tax returns where relevant.
How to complete IHT400 sections relevant to crypto
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Asset descriptions: list each cryptoasset by type (e.g. bitcoin), quantity, and wallet or exchange where held. Avoid vague descriptions; include wallet addresses or exchange account IDs where appropriate.
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Valuations: include the method used, sources (exchange names and timestamps, aggregator references), and attach exported CSVs or screenshots.
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Notes to the tax authority: if ownership is disputed or keys are missing, include a clear statement and details of recovery efforts.
Example: part of estate including crypto
Estate summary:
- Cash: £120,000
- Property: £350,000
- Bitcoin: 2.5 BTC valued at £75,000 (method: average of Exchange A and Exchange B at date of death)
IHT payable calculation uses the full asset values less allowances and exemptions. Any disputed or unrecoverable crypto should be clearly documented.
Advantages, risks and common mistakes
✅ Benefits / when to apply
- Clear planning reduces probate delays and the risk of lost assets.
- Valuing at date of death provides a clean CGT base for heirs.
- Documented gifting or trusts can reduce IHT when properly executed and timed.
⚠️ Errors to avoid / risks
- Failing to record keys and access leading to irrecoverable assets.
- Using inconsistent valuation methods without explanation; this raises HMRC queries.
- Assuming exchange custody removes estate inclusion; beneficial ownership matters.
Frequently asked questions
What is crypto inheritance and IHT?
Crypto inheritance and IHT refers to the treatment of cryptoassets for inheritance tax: they are property and must be included in the estate valuation at market value on the date of death.
How does HMRC want bitcoin valued at death?
HMRC requires the fair market value on the date of death; commonly used methods include exchange spot prices or a volume-weighted average from reputable sources, documented with exported evidence.
Do heirs pay capital gains tax on inherited crypto?
Heirs do not pay CGT on receipt; CGT may arise when heirs later dispose of the crypto, using the date-of-death market value as their base cost.
Can gifting crypto during life reduce IHT?
Gifting can reduce IHT if the donor survives seven years and the gift is a genuine transfer of beneficial ownership; documentation and timing are essential.
What should executors include on the IHT400 for crypto?
Executors should list type and quantity, wallet addresses or exchange account IDs, valuation method and source, and attach supporting exports or screenshots.
What if private keys are lost?
If keys are lost and no recovery evidence exists, the assets may be unrecoverable and should be documented as such; seek professional recovery specialists if partial evidence exists.
Are staking rewards after death part of the estate?
Staking rewards that accrue after death are generally not part of the deceased's estate unless they were payable and attributable to the deceased prior to death; record status at date of death and seek professional advice.
Your next step:
- Locate and secure a written inventory of all crypto holdings and access details.
- Export exchange and on-chain transaction records and note the chosen valuation method for the date of death.
- Contact a probate solicitor or specialist tax adviser to review IHT400 reporting and to assist with executor duties.