By the third or fourth deal, most operator-angels get a different kind of offer. Not an allocation, an invitation: come in as an adviser, help with hiring or sales or the next raise, and take some equity for your trouble. This is the advisory share, the operator's second currency, and it turns a useful CV into a cap-table position without a cheque.
The idea is simple. The UK tax treatment isn't, and it surprises people in two specific places: the equity is taxed as income rather than capital, and none of the venture reliefs apply to it. Add the perennial question of what a normal grant looks like, and there's enough here for a page of its own.
Advisory shares are payment for work. The tax system treats them that way, whatever the cap table calls them.
The Carry's reading of HMRC's employment-related securities rules is blunt: adviser equity is income on day one, not a capital position, and pricing that in changes the whole conversation.
What are advisory shares?
Advisory shares are equity, or options over equity, granted to an adviser in return for services rather than cash. The services are the price: introductions, hiring help, sector depth, a standing call each month. Nothing is subscribed for; the shares are the payment.
Founders offer them because early-stage companies are long on equity and short on salary budget, and because the right operator can matter more than another small cheque. That is the same logic that makes operators attractive investors in the first place (the case is set out in why operator angels win). The grant usually comes from the same pool that funds employee options, which is why pool size concerns you twice over: once as an investor diluted by it, once as an adviser paid from it. The mechanics live in the option pool explainer.
One distinction runs through everything below: an advisory share is earned, not bought. Hold on to that and the tax treatment stops being surprising.
How much equity does an adviser usually get?
There's no UK rulebook, but there is a common reference point. The FAST agreement, the Founder/Advisor Standard Template published by the Founder Institute, has become the industry's shorthand for adviser terms. Its bands sit at roughly 0.25% to 1% of the company, vesting monthly over about two years, with no cliff or only a short one. Treat those numbers as an illustration of common practice, not a rule: FAST is a US-origin template, UK practice varies, and every band in it flexes with stage and workload.
What moves a grant within that range is qualitative. Earlier companies pay more equity for the same help, because the equity is worth less and the help matters more. A deep commitment pays more than a monthly call. And an adviser whose name helps the next raise commands more than one who stays off the deck.
Whatever the number, it belongs in a written agreement: scope, the vesting schedule, what happens if the relationship ends, what happens on a sale. A handshake grant is the version that ends in a dispute.
How are advisory shares taxed in the UK?
Generally as income, not capital: shares or options received in return for services fall within HMRC's employment-related securities rules, and the starting position is income tax on the market value of the shares when you acquire them, less anything you actually pay. The label misleads in one way. The regime reaches well beyond ordinary employment, and adviser arrangements can be caught. HMRC's ERSM manual is the map, and which set of income rules applies turns on the precise facts of the role.
The practical sting is timing. Income tax at market value on acquisition can mean a bill on shares you can't yet sell. That's the main reason the usual instrument for a non-employee adviser is the unapproved option rather than shares up front: with an option, the income tax point generally arrives when you exercise, not when you're granted it (ERSM110000 covers the mechanics).
One line on EMI, the tax-advantaged option scheme: it's designed for employees, and within limits certain directors, so a non-employee adviser generally can't use it. Hence the unapproved route.
Do advisory shares qualify for SEIS or EIS?
No: advisory shares can't qualify for SEIS or EIS, because both schemes require new shares subscribed for in full, in cash, a condition set out plainly in HMRC's investor guidance. Shares received for services fail that test at the door, whatever else is true of the company.
The subtler trap is mixing. Plenty of operator-angels end up wearing both hats in the same company: adviser equity on one side, a cash investment on the other. The cash subscription can still qualify, but the surrounding facts need checking. How the round is structured matters (the ground covered in which deal structures keep your SEIS/EIS relief), and so does whether the role itself creates a connection problem, the tests unpacked in the director-relief rules. Neither page needs repeating here. The point is that the two hats interact, and the time to check is before either agreement is signed.
What should you settle before saying yes?
Experienced advisers tend to walk the same short list before agreeing anything. What exactly is being bought: hours, introductions, a name on the deck? Shares or options, and what each route means for tax and timing? The vesting schedule, and what happens to unvested equity if the company is sold or the relationship sours? And how the grant sits alongside any cash investment made, or contemplated, in the same company?
None of that adds up to a recommendation to take adviser equity or to turn it down; the right answer depends on the company, the workload and your own tax position. This article is general information, not tax, legal or financial advice. Check the current rules on GOV.UK, put any grant in front of a qualified tax adviser before you accept it, and have a solicitor read the advisory agreement itself. Ten minutes with each costs less than unwinding a grant that was taxed in a way nobody expected.
Frequently asked questions
What are advisory shares?
Advisory shares are equity, or options over equity, granted to a startup adviser in return for services rather than cash. They're common where a company wants operator expertise it can't pay for in salary. Legally they're ordinary shares or options like any other; what's different is how they're earned, and that is what drives their UK tax treatment.
How much equity does a startup adviser get?
Practice varies and there's no UK rule. The most cited reference is the FAST agreement, an industry template from the Founder Institute, which illustrates bands of roughly 0.25% to 1%, vesting monthly over about two years. Treat that as an illustration of common practice, not an entitlement; stage, workload and the company's own norms all move the number.
Are advisory shares taxed as income in the UK?
Generally, yes. Shares received in return for services fall within HMRC's employment-related securities rules, and the broad position is income tax on the market value of the shares when you acquire them, rather than capital treatment. The exact analysis depends on the facts of the role, which is why a qualified tax adviser should look at any grant before it's accepted.
Do advisory shares qualify for SEIS or EIS?
No. Both schemes require new shares subscribed for in full, in cash, so shares received for services can't qualify. A separate cash investment in the same company may still be eligible, but combining an adviser role with an investment raises connection and structuring questions that need checking against the rules before either is signed.
Do I need professional advice before accepting advisory shares?
This article is general information, not tax, legal or financial advice. The tax treatment of adviser equity turns on your personal circumstances and the precise facts of the arrangement. Check the current rules on GOV.UK, ask a qualified tax adviser to review the grant, and have a solicitor review the advisory agreement itself before you sign.