Crypto Inheritance Tax UK: What Happens to Your Crypto When You Die

Cryptocurrency has created a new set of challenges for estate planning. Unlike a bank account that can be frozen and transferred by a solicitor, crypto held in a self-custody wallet may be permanently inaccessible if the right information is not left behind. On top of the access problem, Inheritance Tax (IHT) applies to cryptocurrency just as it does to cash or property.

Is crypto subject to Inheritance Tax?

Yes. HMRC treats cryptocurrency as a capital asset forming part of the deceased's estate. If the total estate — including all crypto — exceeds the nil-rate band (£325,000 for a single person, or up to £1 million for married couples using all available allowances), IHT is charged at 40% on the excess.

How is crypto valued for IHT purposes?

Crypto is valued at its GBP market price on the date of death. Because prices fluctuate significantly, the executor should record the price of each cryptocurrency held at the exact time of death (or as close as possible). If the estate includes large positions, the valuation should be documented carefully and may need to be agreed with HMRC. Unlike shares, there is no mid-price HMRC averaging rule for crypto — the market price at the time is used.

The access problem

This is where crypto differs fundamentally from traditional assets. If the deceased held crypto on a centralised exchange, the executor can typically request access through a formal legal process with a death certificate and grant of probate. If the crypto was in a self-custody hardware or software wallet, access depends entirely on the private keys or seed phrase being available. A seed phrase that was never written down, or that died with the owner, means the crypto is lost permanently — HMRC would still count its estimated value in the estate, potentially triggering an IHT bill on assets the heirs cannot access.

Practical estate planning steps

First, make sure your seed phrases and private keys are documented securely and that your executor knows how to find them. A sealed letter stored with your will is one approach, as is a specialised digital inheritance service. Do not store seed phrases in plain text on cloud services. Second, consider whether the scale of your crypto holdings warrants professional estate planning advice to make use of available exemptions and reliefs.

Spousal exemption

Transfers between spouses and civil partners are fully exempt from IHT. If you transfer crypto to a spouse before death, it falls outside your estate entirely. Note that this is also CGT-free during lifetime. However, this only defers the IHT — it becomes part of the surviving spouse's estate when they die.

Business Property Relief

In rare cases, crypto held as part of a trading business (for example, a crypto mining operation run as a business) may qualify for Business Property Relief, reducing or eliminating IHT. This is a narrow relief and requires careful structuring and professional advice.

CryptoLens gives you an accurate real-time valuation of your entire crypto portfolio in GBP — an essential starting point for any estate planning exercise.