Cryptoassets and Inheritance Tax are receiving increased attention from HMRC. In September 2026 HMRC confirmed that it will write to a number of personal representatives and agents dealing with estates that include crypto.
The announcement does not change the underlying tax rules. Crypto can already form part of an individual's estate for Inheritance Tax purposes. However, HMRC's latest activity highlights a more practical issue. Has the estate identified all of the deceased's crypto, valued it correctly at the date of death and reported it appropriately?
This can present challenges that rarely arise with conventional investments. Crypto may sit across centralised exchanges, self-custody wallets, decentralised finance (DeFi) protocols and several blockchains. There may be no single statement showing the full portfolio.
There can also be tax consequences beyond Inheritance Tax. A date-of-death valuation can affect a later Capital Gains Tax calculation if the estate sells the crypto. Previously unknown wallets or accounts may also reveal historic transactions that were not reported during the deceased's lifetime.
Crypto and Inheritance Tax: at a glance
Crypto can form part of an estate
HMRC treats cryptoassets as property for UK tax purposes. Crypto owned at death may therefore form part of the estate for Inheritance Tax purposes..
HMRC is increasing its focus on crypto and Inheritance Tax
In September 2026, HMRC confirmed that it would write to several personal representatives and agents about crypto held by deceased individuals. This follows earlier HMRC activity reminding those dealing with estates not to overlook crypto.
Identifying the full portfolio may be difficult
Crypto wealth can sit across exchanges, self-custody wallets, DeFi protocols and different blockchains. An exchange statement may therefore show only part of the picture.
The date-of-death valuation matters
Crypto will generally need a market value at the date of death. That value can affect both Inheritance Tax and a later Capital Gains Tax calculation if the estate disposes of the assets.
HMRC has increasing visibility of crypto holdings
The Cryptoasset Reporting Framework (CARF) will provide HMRC with substantially more information from reporting crypto service providers. It forms part of a wider increase in tax transparency around crypto.
HMRC's increasing focus on crypto and Inheritance Tax
HMRC's September 2026 announcement is the latest indication that crypto is receiving greater attention when estates are administered.
Earlier in 2026, HMRC reminded those dealing with estates not to overlook crypto. It has now gone further. HMRC says it will write to several personal representatives and agents about crypto held by deceased individuals.
This increased attention comes as HMRC gains access to more information about crypto activity.
Its first official statistics on reported crypto gains, published in August 2026, showed that 17,600 individuals reported £1.38 billion of crypto gains for 2024/25. Within that group, 240 individuals reported gains exceeding £1 million.
These figures relate to Capital Gains Tax rather than Inheritance Tax. They do not provide evidence of undeclared crypto in estates. However, they illustrate the scale of crypto wealth now appearing within the UK tax system.
CARF will increase HMRC's visibility further
HMRC's access to information will increase via the Cryptoasset Reporting Framework (CARF).
From 1 January 2026, UK reporting cryptoasset service providers have had to collect specified information about users and transactions. HMRC will begin receiving CARF data from 2027.
CARF will not give HMRC a complete inventory of someone's crypto at death. Investors may move assets between exchanges or into self-custody. They may also use DeFi protocols or providers outside a particular reporting obligation.
HMRC will therefore have more information, but establishing the full contents of a substantial crypto estate can still require detailed investigation.
The practical question is not simply whether the deceased invested in crypto. It is whether the estate has taken reasonable steps to establish what they actually owned and report it correctly.
Establishing which crypto forms part of the estate
HMRC treats cryptoassets as property for Inheritance Tax purposes. Personal representatives therefore need to establish what crypto and related interests the deceased beneficially owned at death.
For someone who used only a mainstream exchange, this may be relatively straightforward. Bitcoin, Ether, stablecoins and other tokens may appear in the account history.
Even then, the estate needs to establish the quantity held and an appropriate date-of-death value.
An exchange account should therefore never automatically be treated as the complete crypto
Blockchain records may show assets leaving an exchange rather than being sold. Where this happened, the estate may need to trace the transaction. The key question is whether the deceased continued to own or control those assets at death.
The Inheritance Tax position depends on what the deceased actually owned, not simply what appears on the first exchange statement.
Determining the full extent of a crypto portfolio
One important difference between substantial crypto wealth and a conventional investment portfolio is the absence of a single custodian.
A bank, stockbroker or investment manager will usually leave a relatively clear record. A crypto investor may instead have accumulated wealth across exchanges, private wallets, DeFi protocols and several blockchains.
An exchange account can therefore provide a useful starting point without necessarily showing the complete picture.
For example, an investor may have bought Bitcoin or Ether through an exchange and later withdrawn it to self-custody. The exchange balance at death could then materially understate the crypto they still owned.
HMRC's guidance recognises this problem. It suggests looking more widely at the deceased's financial affairs. Relevant evidence can include exchange accounts, bank and credit card statements, emails, devices and other records.
For someone with significant digital wealth, good lifetime records can make an enormous difference. They can help establish what exists without compromising the security of private keys or recovery phrases.
Where records show crypto leaving an exchange, further investigation may be necessary. The assets may have been sold, transferred to another wallet or committed to another crypto arrangement.
Tracing crypto via blockchain records
Where a wallet address or exchange account is known, blockchain records can sometimes help reconstruct a portfolio.
A withdrawal from an exchange may lead to a self-custody wallet that then shows token swaps, staking activity, transfers to other wallets or interactions with DeFi protocols.
This is particularly relevant for long-standing investors who have actively used crypto rather than simply buying and holding on one platform.
An exchange withdrawal does not necessarily represent a disposal. The investor may simply have moved the assets between wallets they control.
Equally, a wallet interacting with a known address does not prove that the same person beneficially owns it. Blockchain data therefore needs to be interpreted in context.
Multiple wallets, bridges, blockchains and DeFi activity can create a complicated history. Reconstructing that history may matter for far more than Inheritance Tax. It can also affect acquisition costs, historic gains, taxable income and the tax position of assets still held.
Lost access to crypto and Inheritance Tax
Self-custody creates a particular estate-planning risk. Legal or beneficial ownership and practical access are not the same thing.
Assets held through a centralised exchange may potentially be recovered through the provider's deceased-customer procedures, whereas access to a self-custody wallet may depend entirely on a private key or recovery phrase.
If those credentials have been lost, the cryptoassets may remain visible on the blockchain while being practically impossible to move.
HMRC's Cryptoassets Manual (CRYPTO25000) states that where cryptoassets are identified as belonging to the deceased but are believed to be inaccessible, the personal representatives should explain why they are inaccessible and provide the value they believe the assets to have in the additional information section of the IHT400.
For anyone holding substantial wealth in self-custody, the distinction between ownership, access and value is critical.
Losing a recovery phrase does not automatically remove the crypto from the estate. Nor should an investor assume that inaccessible crypto creates no Inheritance Tax exposure.
This is why succession planning for a significant crypto portfolio needs to address secure access as well as tax.
Valuing crypto at the date of death
Once the estate has identified the crypto, it will generally need to establish its market value at death.
For Bitcoin, Ether or another actively traded token, obtaining a quoted price may appear straightforward, but a defensible valuation still needs an appropriate source, date and methodology.
Larger or less liquid holdings can present greater difficulties. Crypto markets trade continuously and prices can move sharply within a day. Values may also differ between trading venues.
A quoted token price does not necessarily prove that a large holding could have been sold at that price.
NFTs present different valuation problems because there may be no directly comparable asset or active market.
DeFi positions can add another layer of complexity. The investor may hold an economic interest in a liquidity pool, lending arrangement or protocol rather than a simple quantity of one token.
Why the valuation evidence matters
For a substantial portfolio, the estate should retain contemporaneous evidence of its valuation methodology and sources.
The date-of-death value can also become the acquisition value for a later Capital Gains Tax calculation.
An inaccurate valuation can therefore create problems beyond the original Inheritance Tax return
How crypto wealth is reported for Inheritance Tax
Crypto can form part of an individual's estate in the same way as other property. However, reporting becomes more involved when significant wealth sits across multiple wallets, platforms and types of digital asset.
HMRC's current guidance says crypto should be included in box 76 of form IHT400. The estate should provide appropriate details in the additional information section where necessary.
For a significant portfolio, simply completing the correct box is not enough.
The estate should be able to demonstrate what it identified, why the assets belonged to the deceased and how it established their value.
Self-custody wallets, DeFi positions, NFTs, unusual tokens and inaccessible assets can all require additional supporting evidence.
This is another reason why lifetime record keeping matters. Clear records can prevent executors and family members having to reconstruct years of complex crypto activity after death.
Why crypto volatility can create an unexpected Inheritance Tax problem
A substantial crypto portfolio can expose an estate to a particular risk because digital asset values can change rapidly.
Inheritance Tax generally uses the value at the relevant valuation date. However, an estate may not be able to access or sell the crypto immediately.
The portfolio could fall sharply before a sale becomes possible.
For certain shares and land, legislation provides specific Inheritance Tax loss-on-sale relief. Crypto does not receive the same treatment. HMRC's Cryptoassets Manual specifically states that cryptoassets do not qualify for loss-on-sale relief.
This can have a significant effect where crypto represents a large proportion of the estate.
The estate could face an Inheritance Tax liability based on a value materially above the amount eventually realised. Delays caused by probate, inaccessible wallets or a complex portfolio can increase that risk.
What happens to crypto gains and losses after death?
Death does not normally trigger Capital Gains Tax on the deceased's unrealised crypto gains. Instead, the personal representatives generally take the assets at their market value at the date of death for Capital Gains Tax purposes.
If the value subsequently rises and the estate sells the crypto, a taxable gain may arise. Broadly, that gain reflects the increase in value since death.
The date-of-death valuation therefore serves two purposes. It affects the value included in the estate for Inheritance Tax and can set the starting point for a later Capital Gains Tax calculation.
The tax position is not limited to capital gains. Staking, lending and other arrangements may continue to generate taxable receipts during the administration period. A substantial portfolio can therefore continue creating tax consequences after death.
Outstanding crypto tax liabilities after death
For long-standing crypto investors, the transaction history can matter as much as the assets still held. Previously unknown wallets or exchange accounts may reveal earlier token disposals, crypto-to-crypto exchanges, DeFi transactions or staking receipts. Some of those transactions may have created tax liabilities during the investor's lifetime.
Those historic liabilities are separate from the Inheritance Tax treatment of the crypto held at death.
For example, a wallet worth £100,000 when someone dies, for example, may also contain years of transactions that created Capital Gains Tax or Income Tax liabilities during the investor's lifetime.
Outstanding lifetime tax affairs may still need to be resolved by the estate.
This becomes particularly important where records are incomplete or an investor has relied on incomplete software data. Maintaining reconciled wallet and transaction records during lifetime can prevent significant problems later.
Inheritance Tax and internationally held crypto wealth
International mobility can make the Inheritance Tax position considerably more complex.
Unlike land or other physical property, Bitcoin and similar exchange tokens have no obvious physical location. The location, or situs, of crypto for tax purposes therefore requires a different analysis.
This has particular significance under the rules applying from 6 April 2025. An individual's exposure to UK Inheritance Tax can now depend on their history of UK residence.
Earlier periods may instead fall within the former domicile-based regime.
HMRC has developed an approach to the situs of exchange tokens. However, investors should not assume that every token or digital right will necessarily receive identical treatment.
For internationally mobile investors with substantial crypto wealth, several factors may need to be considered together. These include residence history, the nature and location of assets and possible taxation in another jurisdiction.
Moving overseas, using an offshore exchange or holding crypto in self-custody does not by itself determine the UK Inheritance Tax position.
Using lifetime crypto gifts as part of estate planning
Lifetime gifts of crypto can form part of estate planning. However, the Inheritance Tax consequences should not be considered in isolation.
A lifetime gift may constitute a transfer of value for Inheritance Tax purposes. Depending on the circumstances and the relevant rules, its value may eventually fall outside the donor's estate.
Capital Gains Tax can create an immediate issue.
A gift of crypto to another individual will normally be treated as a disposal at market value. An investor with a substantial unrealised gain could therefore face a tax liability despite receiving no cash for the crypto they have given away.
Different rules can apply to transfers involving spouses or civil partners, charities and trusts.
Consider the CGT cost before making the gift
For someone with significant crypto wealth, the immediate Capital Gains Tax cost should be considered alongside any potential Inheritance Tax benefit.
An estate-planning strategy that looks attractive from an Inheritance Tax perspective can produce a very different result once the CGT consequences are modelled.
You can read more about gifting crypto in a tax efficient manner in our previous post here.
HMRC’s growing visibility of crypto holdings
HMRC's focus on crypto within estates forms part of a wider increase in tax transparency.
The Cryptoasset Reporting Framework does not change the underlying Inheritance Tax rules. However, it will give HMRC another significant source of information about crypto activity.
UK reporting cryptoasset service providers have had to collect specified user and transaction information since 1 January 2026. HMRC will begin receiving CARF data from 2027.
However, CARF will not provide HMRC with a complete inventory of an individual's crypto wealth. Self-custody wallets may remain outside a reporting provider. Investors may also transfer crypto between services or interact with DeFi protocols.
However, information from crypto service providers will give HMRC greater visibility of participation in crypto markets. It will also provide another source against which HMRC can compare tax reporting.
For investors who have accumulated significant crypto wealth over many years, the way the landscape is evolving is obvious. The assumption that crypto is inherently difficult for HMRC to identify is becoming increasingly outdated. Good historic reporting and properly reconciled records matter more, not less.
Why crypto tax software does not always present the full picture
Koinly, Recap and other crypto tax software can be extremely useful for bringing together transaction histories and calculating capital gains, losses and taxable income.
However, the accuracy and completeness of any report ultimately depend on the data that has been connected to the software and how individual transactions have been classified.
Missing wallet histories and incomplete cost bases can affect the calculation. So can transfers incorrectly classified as disposals and more complex DeFi or staking transactions. These issues become more important as a portfolio grows.
An investor who has used several exchanges, wallets, blockchains and protocols over many years may have a complex transaction history. A software report should not automatically be treated as a complete inventory of that investor's digital wealth.
For a substantial portfolio, crypto tax software is best viewed as part of the record-keeping and calculation process. It is not a substitute for checking that the underlying data is complete or that the tax treatment is correct.
We look at some of the practical checks investors should make in our guide to what to check on your crypto tax report before filing with HMRC.
Estate planning for substantial cryptoasset portfolios
For individuals with significant crypto wealth, estate planning needs to address a practical issue that does not arise in quite the same way with conventional investments: whether the assets can be identified and ultimately accessed if the owner dies unexpectedly
This does not mean leaving private keys or seed phrases with a Will or storing them somewhere insecure.
Instead, the investor needs a secure arrangement that allows the appropriate people to establish what exists, where it is held and how access can eventually be obtained.
This becomes increasingly important as a portfolio grows in value and complexity.
Assets may sit across exchanges, self-custody wallets, multiple blockchains and DeFi protocols. The investor may understand the structure perfectly. An executor or family member trying to reconstruct it years later may not.
Situations involving separate personal and business crypto
There can be an additional complication for founders and business owners operating in crypto, Web3 or the wider digital economy.
Personal crypto, company-owned assets and crypto connected with other business structures need to remain clearly distinguishable.
Ownership should not have to be reconstructed from wallet activity after death.
Preserving the tax history of a crypto portfolio
Good record keeping is important for more than simply establishing what cryptoassets exist. Wallet information, transaction histories, acquisition costs and previous tax calculations may all become relevant. The estate may need them to support an Inheritance Tax valuation, calculate later disposals or deal with historic tax issues.
For a substantial portfolio, succession planning should therefore address two separate questions.
Firstly, can the crypto eventually be accessed? Secondly, can somebody establish its ownership, value and tax history?
These arrangements should also evolve as the portfolio and the investor’s circumstances change. Cryptoassets that began as a relatively modest investment can become a significant component of an individual’s wealth following a strong market cycle. Personal circumstances can also change.
Moving overseas, making substantial lifetime gifts, introducing company or other ownership structures, or becoming involved in more complex DeFi arrangements can also change the tax and succession considerations
Where cryptoassets represent a significant part of an individual’s wealth, these issues should not be considered only when preparing or updating a Will. They should form part of the wider tax and estate planning around how digital wealth is owned, documented and ultimately passed on.
What HMRC's increased focus means for crypto investors
HMRC has not yet introduced a new Inheritance Tax charge on crypto though this may change in the forthcoming Budget. The significance of its September 2026 announcement is the increased attention being given to whether crypto forming part of an estate have been properly identified, valued and reported
For individuals with substantial crypto wealth, these issues are worth considering long before an estate needs to be administered.
A portfolio may span exchanges, self-custody wallets, blockchains and DeFi protocols. That can make it much harder to reconstruct than a conventional investment portfolio.
Volatility, inaccessible wallets and incomplete transaction histories can add further complications. International mobility can do the same. At the same time, HMRC's visibility of crypto activity is increasing through CARF and other information sources.
The practical issue therefore goes far beyond completing an IHT400 after death.
Where crypto represents significant wealth, investors should ensure that ownership records, transaction histories and previous tax reporting are in order. Succession arrangements should also reflect the particular challenges created by digital assets.
Doing this during lifetime can make a substantial difference to those who eventually have to deal with the portfolio.
Need advice on a substantial crypto portfolio?
Significant crypto wealth can create tax issues that extend well beyond calculating gains and losses each year. Inheritance Tax, lifetime gifts, historic transactions, international residence, DeFi activity and the way assets are owned can all become relevant, particularly where a portfolio has developed over many years.
The Friendly Accountants are Chartered Accountants and Chartered Tax Advisers specialising in tax and accounting issues affecting individuals and businesses operating in the digital economy. We have been advising on UK crypto taxation since 2016 and combine specialist tax knowledge with a practical understanding of cryptoassets, wallets, exchanges, DeFi and crypto tax software
Talk to us about your crypto tax position
If you have a substantial crypto portfolio and would like to discuss your Inheritance Tax position, succession planning or wider UK tax affairs, please get in touch and we will be happy to discuss how we can help
You can explore our other Crypto tax guides or, if you would like to discuss how we could help your business, complete our Business Questionnaire and a member of our team will be in touch.