How Do I Pay Inheritance Tax on Crypto Assets?

Cryptocurrency is part of your estate for Inheritance Tax purposes. Learn how to value, report, and pay tax on crypto assets in the UK after death.

Introduction

As cryptocurrency becomes a more common part of personal wealth, it is increasingly being included in wills and estates. However, many people do not realise that crypto assets are subject to Inheritance Tax (IHT) in the same way as other assets such as property, savings, or shares.

If someone dies holding cryptocurrency, its value must be reported to HMRC and included in the estate for IHT purposes. This article explains how Inheritance Tax applies to crypto assets, how to value them correctly, and how to pay any tax due.

How HMRC Treats Crypto for Inheritance Tax

HMRC classifies cryptocurrency as property, not money. This means it is part of the deceased person’s estate and may be liable for Inheritance Tax.

The executor or personal representative of the estate is responsible for reporting and paying any tax due. This process follows the same rules that apply to other forms of personal property, such as shares or valuable collectibles.

Inheritance Tax is charged on the total value of the estate, which includes:

  • Property and land

  • Bank accounts, savings, and investments

  • Personal belongings

  • Crypto assets such as Bitcoin, Ethereum, or NFTs

The standard rate of IHT is 40%, but it only applies to the portion of the estate above the available allowances.

Tax-Free Allowances and Thresholds

Everyone has a nil-rate band of £325,000, meaning the first £325,000 of their estate is tax free.

Additional reliefs may apply:

  • A residence nil-rate band of up to £175,000 if a home is left to direct descendants.

  • Married couples and civil partners can transfer unused allowances, potentially giving a combined threshold of £1 million.

Crypto assets are included in the total value of the estate when calculating whether these thresholds are exceeded.

Valuing Crypto Assets for Inheritance Tax

Crypto assets must be valued at their fair market value on the date of death. Because cryptocurrency prices fluctuate rapidly, accurate valuation is essential.

To determine the correct value:

  • Use reliable exchange data from the date of death.

  • If the deceased used multiple exchanges or wallets, include all holdings.

  • Convert all values into pounds sterling based on the exchange rate on the same date.

It is advisable to keep screenshots or transaction records as evidence of the valuations. If you are unsure, an accountant or crypto valuation specialist can help provide accurate figures for HMRC.

Reporting Crypto Assets to HMRC

Crypto assets must be included when completing the Inheritance Tax account (IHT400) if IHT is due, or the IHT205 form if the estate is below the taxable threshold.

You will need to provide:

  • A list of all wallets and exchanges holding crypto assets.

  • The total quantity and type of crypto tokens owned.

  • The market value in pounds sterling at the date of death.

Failure to include crypto assets in an estate report could lead to penalties or interest charges if HMRC later discovers unreported holdings.

Accessing Crypto After Death

Accessing crypto after someone dies can be one of the most challenging parts of the process. Without the correct information, crypto assets may be lost permanently.

To manage this properly:

  • Executors need access to private keys, seed phrases, or exchange accounts.

  • If the deceased used a crypto exchange, you may need to contact the platform directly with a copy of the death certificate, will, and probate documents.

  • If assets are held in cold storage or hardware wallets, physical access to the devices and recovery phrases is essential.

It is recommended that individuals keep a secure, up-to-date record of their crypto wallet information to assist executors after death.

Paying the Inheritance Tax

Inheritance Tax is normally due within six months of the end of the month in which the person died.

Payment is usually made by the executor or personal representative, using funds from the estate. Because crypto assets are often volatile, executors may need to sell the assets quickly to avoid value fluctuations affecting the tax calculation.

If the estate includes property, crypto, or other non-cash assets that cannot easily be sold, HMRC may allow the tax to be paid in instalments over up to 10 years, though interest will apply.

Payments can be made by:

  • Transferring cash from estate bank accounts.

  • Selling crypto assets to raise the necessary funds.

  • Using personal funds and later reimbursing yourself from the estate.

Example Scenario

Mark dies holding 5 Bitcoin and several Ethereum tokens. On the date of death, one Bitcoin is valued at £30,000, making his total crypto holdings worth £200,000.

Mark’s estate also includes £400,000 in property and savings, giving a total estate value of £600,000. After deducting his £325,000 nil-rate band, £275,000 is taxable at 40%.

His executor must report the crypto holdings to HMRC as part of the estate and pay £110,000 in IHT (40% of £275,000) from the estate funds.

If Mark’s estate passes to his spouse, however, the entire estate is tax free under the spousal exemption.

Inheritance Tax Planning for Crypto Holders

There are several steps you can take to reduce potential IHT on your crypto assets:

  • Use your annual gift allowances: You can gift up to £3,000 each year without it being added to your estate for IHT.

  • Make gifts early: Crypto given away more than seven years before death is usually exempt from IHT.

  • Leave crypto to your spouse or civil partner: Transfers between spouses are free of Inheritance Tax.

  • Consider trusts: Placing crypto assets in a trust may help reduce IHT exposure, though professional advice is essential.

  • Keep clear records: Ensure your executor can locate and value your crypto holdings easily.

Record Keeping

Executors should retain:

  • Wallet addresses and transaction IDs.

  • Exchange account information.

  • Valuation data from the date of death.

  • Any correspondence with crypto platforms.

HMRC may request this evidence when assessing the estate’s tax liability, so maintaining detailed records is vital.

The Role of an Accountant

An accountant or crypto tax specialist can help you:

  • Value crypto assets accurately.

  • Report them correctly to HMRC.

  • Manage capital gains or losses when selling assets to pay IHT.

  • Plan your estate to minimise future tax liability.

Professional guidance is particularly important if the deceased held assets across multiple blockchains or exchanges.

Conclusion

Crypto assets are fully subject to Inheritance Tax in the UK. Their value must be included in the deceased’s estate and reported to HMRC at the market rate on the date of death. Executors are responsible for paying any IHT due, usually within six months.

By keeping accurate records, securing wallet access, and planning ahead, you can ensure that your crypto assets are transferred smoothly and that tax is paid correctly. Working with a tax professional will help you navigate the process confidently and protect the value of your digital estate.