Trusts and estates that hold or inherit cryptocurrency must follow specific tax rules.
Trusts Holding Crypto
| Trust Type | Tax Treatment |
|---|---|
| Bare trust | Beneficiary is taxed on gains and income |
| Interest in possession trust | Beneficiary receives income, trustees pay CGT |
| Discretionary trust | Trustees pay income tax and CGT |
| Settlor-interested trust | Settlor is taxed on gains and income |
CGT for Trusts
| Trust Type | CGT Rate | Annual Allowance |
|---|---|---|
| Bare trust | Beneficiary’s rate | Beneficiary’s allowance |
| Interest in possession | 20% (trustees) | £1,500 (2025-26) |
| Discretionary trust | 20% (trustees) | £1,500 |
| Settlor-interested | Settlor’s rate | Settlor’s allowance |
Trusts have a lower CGT allowance (£1,500) than individuals (£3,000).
Income Tax for Trusts
| Trust Type | Income Tax Rate |
|---|---|
| Bare trust | Beneficiary’s rate |
| Interest in possession | Beneficiary’s rate |
| Discretionary trust | 45% (or 8.75% for dividends) |
| Settlor-interested | Settlor’s rate |
Estates and Crypto
When someone dies holding crypto:
| Event | Tax |
|---|---|
| Crypto held at death | Included in estate value (IHT) |
| Executor sells crypto | CGT applies (20% for estates) |
| Transfers to beneficiaries | No CGT (no gain/no loss for estates) |
| Beneficiary inherits crypto | Cost basis = market value at death |
Inheritance Tax on Crypto
| Value | IHT Rate |
|---|---|
| Under £325,000 (nil rate band) | 0% |
| Over £325,000 | 40% (reduced to 36% if 10%+ left to charity) |
| Transferred more than 7 years before death | Potentially exempt |
Crypto is valued at market rate on the date of death.
Executor Duties
| Duty | Action |
|---|---|
| Locate all crypto | Find wallets, exchanges, seed phrases |
| Value at date of death | Use reliable exchange rate source |
| Report to HMRC | Include in IHT account |
| Sell or transfer | Execute according to will |
| Pay any tax due | From the estate |
| Distribute to beneficiaries | With proper records |
Practical Issues for Executors
| Issue | Challenge |
|---|---|
| Finding seed phrases | Without them, crypto may be lost |
| Accessing exchanges | 2FA recovery may be complex |
| Valuing illiquid tokens | Some tokens have no market price |
| Tax reporting | Complex multi-jurisdiction issues |
Bottom Line
Trusts holding crypto have lower CGT allowances (£1,500) and higher income tax rates (45% for discretionary trusts). Estates must value crypto at death for IHT. Executors need crypto knowledge or professional help. Beneficiaries inherit crypto with a cost basis equal to the value at death. Keep clear instructions for executors. Consider professional tax advice for trust and estate crypto holdings.
Choosing the Right Trust Structure
The choice of trust structure has significant tax implications for crypto holdings. A bare trust is straightforward: the beneficiary owns the crypto outright and pays all tax at their own rates. This works well when the beneficiary is a lower-rate taxpayer and the settlor does not need to retain control.
Discretionary trusts offer more flexibility — the trustees decide who receives income and when — but the tax cost is substantially higher. The 45% income tax rate on discretionary trust income, combined with the restricted £1,500 CGT allowance, means that a discretionary trust holding a large crypto position could face a much larger tax bill than the same assets held personally or in a bare trust.
For estates, the practical challenge is often locating the crypto in the first place. Unlike bank accounts, there is no central register of crypto holdings. Executors should check for hardware wallets, exchange accounts, and any documentation the deceased may have left. If the estate is complex or the crypto is substantial, engaging a solicitor or accountant with experience in digital assets is typically worth the cost. Early planning — leaving clear instructions about wallet locations, exchange accounts, and seed phrase storage — can save executors months of work and prevent assets from being lost entirely.