It is estimated by the Financial Conduct Authority (FCS) that at least 12% of the UK adult population now owns cryptocurrency (“crypto”). This is up from just 4% in 2021.
Given the prominence of this asset class across the UK, it is clear that Private Client advisors are no longer able to bury their heads in the sand when it comes to advising on the succession (and tax treatment) of Crypto.
During a major summit in London last month, Rachel Reeves sent a clear message that the regulation of crypto is a major priority for government and announced that draft legislation covering this area has been published and that HM Treasury are welcoming any technical comments on the draft by 23 May 2025.
The Chancellor boasted that “Robust rules around crypto will boost investor confidence, support the growth of Fintech and protect people across the UK”. This is a welcomed approach to Crypto to see that the government is willing to embrace this industry and tackle the regulatory issues head on.
It is worth remembering some fundamentals around Crypto and how they are to be treated for Tax purposes under current legislation:
- HMRC does not consider crypto to be money or currency (meaning that crypto is subject to Capital Gains Tax). However, if you are a “trader”, crypto gains and losses may be subject to Income Tax, instead of CGT.
- Crypto is “property” for the purposes of Inheritance Tax
- The “location” of crypto (often referred to as “situs”) is relevant for both CGT and IHT for UK resident and non-domiciled individuals
CGT – Individuals
Given the instability of crypto there are further opportunities for tax planning for individuals around CGT where, for example, their crypto has sustained a significant loss (which has been realised), they should be able to carry forward those losses indefinitely. So that, if they are sitting on other assets that are standing at a significant gain, it may be possible to sell those assets (if desirable) and then offset those significant gains against the losses incurred on the crypto.
CGT – Estates
This position contrasts with Personal Representatives dealing with a deceased’s person’s estate whereby losses sustained during the deceased’s lifetime cannot be carried forward to be offset against gains made during the period of estate administration. However, (in very simplified terms), if a deceased disposed of assets (including crypto) in the part of the tax year before death (and sustained losses on those disposals) then (subject to offsetting those losses against gains in that tax year), they may then carry any remaining losses back to set those off against any gains in the 3 tax years prior to the tax year in which they died.
At Vault Private Client, our advisors have been leading the way on advice surrounding crypto and have become specialists in this area. If you would like to discuss any concerns you have about the succession of your Crypto, or how best to structure the passage of your crypto assets within your estate, our experts would be delighted to hear from you.
Please reach out to our solicitors on [email protected] for your free initial meeting.
