Cryptocurrency is, in the most basic terms, an alternative digital currency to traditional government-issued currency. A recent survey by Dalia revealed that 5% of the UK are planning to buy cryptocurrency in the next six months, with 9% already owning cryptocurrency.
Experts even predict that 33% of millennials will own some form of cryptocurrency by the end of this year.
The question is – with more people investing in cryptocurrency, how will it affect inheritance when these people die?
Firstly, it’s important to learn which types of cryptocurrencies are currently the most popular. Here are some of the most common forms of cryptocurrency and their codes:
- Bitcoin (BTC)
- Litecoin (LTC)
- Ripple (XRP)
- Ethereum (ETH)
- Zcash (EC)
- Monero (XMR)
Make sure you provide wallet keys in your will
It’s essential to tell you future beneficiaries you have invested in cryptocurrency and to list the details of your cryptocurrency wallet in your will. This is because it’s purchased under a pseudonym and can be very hard to trace if your beneficiaries don’t have the wallet details. By providing your public and private keys in your will, you’re making it much easier for your beneficiaries to access the wallet. Some cryptocurrency providers have policies in place to transfer any cryptocurrency to beneficiaries or next of kin, though at the moment they are hesitant to have these crucial conversations for fear of fraudster activity.
Cryptocurrency is an intangible asset and eligible for Inheritance Tax
HMRC now treats cryptocurrencies as any other currency – so it’s not exempt from Inheritance Tax and should be listed on your will. Cryptocurrency is one of the fastest growing currencies in value, so it’s important to keep track of how much your cryptocurrency fluctuates over time. The current standard exemption threshold for Inheritance Tax is £325,000. For example, if you have £100,000 in Bitcoin in 2018, it may grow to £400,000 by the time you die. If this is the case, your beneficiaries will need to pay a 40% Inheritance Tax rate on the £75,000 that exceeds the threshold.