How is cryptocurrency taxed when someone dies? IHT and CGT (UK)

8 September 2026 · Inherit Vault

HMRC doesn't have a crypto tax. It has inheritance tax and capital gains tax, and it applies both to your Bitcoin exactly as it does to a share portfolio. The awkward bit: the bill arrives on a fixed deadline, and the wallet doesn't always open on time.

Crypto counts as property, and that settles most of it

The Property (Digital Assets etc) Act 2025 came into force on 2 December 2025 and confirmed crypto-tokens can be the object of personal property rights, which we covered here. HMRC had treated exchange tokens as chargeable assets for years before that, and the detail still sits in its Cryptoassets Manual. Crypto forms part of the estate, gets valued, gets taxed, and passes under the will like anything else.

Inheritance tax: valued on the day, at open market value

For IHT, everything is valued at what it would fetch on the open market at the date of death. That rule is section 160 of the Inheritance Tax Act 1984. So it's the price on the day the person died, not whatever you eventually sell for. IHT is 40% on the part of the estate above the £325,000 nil rate band. Section 160 also says you can't discount a holding just because selling all of it at once would tank the price, so a large position in a thin token gets valued as though the market could swallow it whole. Pick one exchange or index as your price source, note the timestamp, and use it for every token.

Death itself isn't a disposal, so there's no CGT on it

Under section 62 of the Taxation of Chargeable Gains Act 1992, dying isn't a chargeable occasion for capital gains tax. Every gain built up over a lifetime of holding drops out of charge. Someone who put £2,000 into Bitcoin in 2016 and died holding £60,000 of it never pays CGT on that £58,000. The estate is treated as acquiring the tokens at their market value on the date of death, the uplift, and the clock starts again from there.

Then CGT restarts from the death value

From 6 April 2026, executors and personal representatives pay CGT at 24%. They get the full £3,000 annual exempt amount, and section 1K(7) of the same Act hands it to them for the tax year of the death and the two years after it. Worked example: tokens worth £60,000 at death, sold eight months later for £75,000. Gain of £15,000, less the £3,000 allowance, so £12,000 taxed at 24%, a bill of £2,880.

Where the tokens legally sit does have an answer

There's no statutory rule for the location of exchange tokens. HMRC's published view, at CRYPTO22600, is that location follows the residency of the beneficial owner. So a UK resident's Bitcoin is a UK asset, whatever country the exchange is registered in. If tokens are co-owned, each owner's share sits where that owner lives. That kills the "it's on an offshore exchange so it's offshore" argument stone dead.

The bill doesn't wait for the wallet to open

IHT is due by the end of the sixth month after the death, and HMRC charges interest after that. The deadline doesn't care whether anyone has found the seed phrase. Worse, losing the private key isn't a disposal. The tokens still exist on the ledger, so they're still in the estate, still valued and still taxed. A negligible value claim can crystallise a loss, but only if you can show there's no prospect of recovering access, which is hard to evidence for an executor who never had the key. It's the most expensive way crypto gets lost.

Paying the tax before you can reach the coins

Banks and building societies can pay HMRC directly out of the deceased's accounts before probate. No crypto exchange does anything of the sort. The instalment option, which spreads IHT over ten years, covers assets that take time to sell: land and buildings, a business, certain shareholdings. Exchange tokens aren't on the list. So the crypto part of the bill gets funded from the rest of the estate, or from an executor's own pocket and reclaimed later, the same squeeze covered in paying inheritance tax before probate.

One decision that changes who pays the CGT

If the executors sell, the estate pays at 24%. If they transfer the tokens to the beneficiaries first and those beneficiaries sell, the gain lands on individuals instead, using their own allowances and possibly the 18% basic rate. Across several beneficiaries that can be a much smaller bill. It's the same choice executors face with a share portfolio, worth settling before anything is sold.

What actually goes wrong isn't the rates

It's the inventory. Executors can't value what they can't find, and no exchange writes to you with a date of death balance. Staking and lending rewards are usually income rather than gains, so a wallet quietly earning yield needs reporting separately. Exchange accounts sit behind two-factor codes on a phone that's now locked. And a hardware wallet in a drawer looks like an old memory stick to everyone else in the family.

The tax treatment is settled and, by HMRC standards, fairly generous: no CGT on death, a clean uplift, the same allowances as any other asset. What isn't settled is whether anyone finds the tokens. Every rule above depends on your executor knowing which chains, exchanges and wallets exist, and that's a list only you can write. Keep it somewhere they can actually reach, and keep it current.

Leave your family a map, not a mystery.

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