If you support estates and regularly prepare Inheritance Tax returns, you may recently have had a letter from HMRC about cryptoassets. The letter is part of a wider HMRC one-to-many initiative and is aimed directly at tax agents who have previously submitted or amended IHT400 returns.
At first glance, the letter can appear routine, but its purpose is more significant; HMRC is reminding agents that cryptoassets are part of a deceased person’s estate for Inheritance Tax purposes and should be included on the IHT400, where required.
With crypto now more common, HMRC is increasingly concerned that these assets are overlooked or misunderstood during estate administration.
This article explains why HMRC is sending these letters, how cryptoassets are treated for Inheritance Tax and what you should consider if you are responsible for an estate.
Why HMRC is contacting people about cryptoassets
HMRC is contacting estates that have already filed Inheritance Tax returns to address a growing issue; cryptoassets are treated as property for IHT purposes and must be included if they were owned when the person died.
HMRC has found that these assets are sometimes missed when estates are being finalised.
There are several reasons why this happens.
In some cases, the deceased may never have mentioned their crypto investments to family members. Access to wallets or accounts may be unclear or difficult to obtain. Sometimes those dealing with the estate simply do not realise that cryptoassets are treated in the same way as savings or investments for Inheritance Tax.
From HMRC’s perspective, this can result in estates being valued too low and the wrong amount of tax being paid. The letter is meant as a prompt to review what has been declared rather than a suggestion that anything deliberate has gone wrong.
What HMRC considers a cryptoasset for Inheritance Tax
HMRC uses the term cryptoassets broadly, and it includes well-known cryptocurrencies such as Bitcoin and Ethereum, as well as other digital tokens and assets that rely on cryptography.
For Inheritance Tax purposes, the important point is that cryptoassets are treated as property. The law says that an estate includes everything a person owned at the time of their death. Even though cryptoassets did not exist when the legislation was written, HMRC has confirmed that they fall within this definition.
This means that if the deceased owned cryptoassets when they died, their value should be included in the Inheritance Tax return alongside more familiar assets such as bank accounts, investments, land and property.
Where cryptoassets should be shown on the IHT400
HMRC’s letter provides practical guidance on how cryptoassets should be reported.
Cryptoassets should be included on the IHT400 in Box 76, which covers other types of assets. HMRC also expects additional details to be included in the extra information section of the return, explaining what the cryptoassets are.
This may include the type of cryptoasset held, where it was stored, and how its value was determined at the date of death. Clear and open disclosure helps reduce the chance of follow-up questions or checks from HMRC later.
How cryptoassets are valued at the date of death
One of the challenges with cryptoassets is working out their value.
Unlike shares listed on a stock exchange, there is no single official price. HMRC expects cryptoassets to be valued at their market value at the date of death. In practice, this usually means using the price shown by a recognised exchange on that day.
Having evidence matters. It is important to keep notes explaining how the value was worked out in case HMRC asks later.
Even if the value of the cryptoassets has dropped since the date of death, this does not change what needs to be reported. For Inheritance Tax, it is the value at the actual date of death that counts.
What HMRC is asking people to do now
HMRC’s letter sets out some clear steps.
First, it asks those dealing with estates to check whether the deceased held any cryptoassets. This is a reminder not to assume the answer, even if the rest of the estate seems straightforward.
Second, it asks that any cryptoassets identified are properly included on the IHT400, with enough detail to explain what they are and how they have been valued.
Third, if a past Inheritance Tax return is later found to be incomplete or inaccurate, HMRC expects this to be corrected by submitting a Corrective Account.
HMRC also explains that in some situations it may still be possible to make a voluntary disclosure, which can help reduce penalties if tax has been underpaid.
If you discover that an earlier Inheritance Tax return was not quite right, HMRC expects this to be corrected by sending in an updated return. Putting things right sooner rather than later is always the safest approach.
HMRC also recognises that people sometimes spot issues themselves. In some cases, making a voluntary disclosure can help reduce penalties where tax has been underpaid.
What happens if cryptoassets are not declared
If cryptoassets are missing from an Inheritance Tax return and HMRC later uncovers this, it may step in to review the estate in more detail. That can mean additional tax to pay, interest on late amounts and possibly penalties.
Taking action early and putting things right voluntarily is often much simpler than dealing with a formal enquiry later. HMRC describes the letter as a nudge to correct the position rather than a warning for this reason.
Why cryptoassets are receiving more attention from HMRC
Crypto ownership in the UK has grown significantly over recent years. What was once unusual is now common enough that HMRC expects cryptoassets to be considered as part of normal estate administration.
HMRC has also increased its focus on cryptoassets more generally. Exchanges are subject to greater reporting obligations, and HMRC’s understanding of digital assets has improved.
As a result, estates that include cryptoassets are more likely to be identified, even where they have not been disclosed voluntarily.
Practical guidance you can use when handling an estate carefully
If you are managing an estate, there are sensible steps that can make things clearer.
Ask simple questions about whether any cryptoassets were owned, even if it seems unlikely at first.
Keep written notes of responses and maintain records, especially where no cryptoassets are reported.
Where cryptoassets are identified, collect information on ownership access and the basis of valuation.
If you are uncertain about handling cryptoassets or deciding what should be declared, seek professional advice early.
Final thoughts
HMRC’s letter about cryptoassets and Inheritance Tax is a reminder of how quickly estates and tax rules are changing. Assets that barely featured a few years ago are now firmly within scope.
For families and personal representatives, the key message is simple. Cryptoassets are part of an estate for Inheritance Tax purposes, and HMRC expects them to be declared.
Taking the time to review what has been included, ask the right questions and correct any mistakes can prevent much more difficult conversations later. Seen in that light, HMRC’s letter is less of a warning and more of an opportunity to put things right before problems arise.
