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.
This content is for educational purposes only. Not financial advice. Do your own research before investing.