Can contractors or advisors receive share options?
By SuLe · Updated 11 June 2026
Yes — contractors and advisors can receive share options, but not tax-advantaged EMI options, which are for employees only. They need unapproved options or growth shares instead. Both work for non-employees, but the gain is generally taxed as income rather than getting EMI's lighter treatment.
Key facts
- EMI is restricted to employees meeting the working-time test — contractors, advisors and non-executive directors are excluded.
- Non-employees can hold unapproved options or growth shares, neither of which has EMI's eligibility conditions.
- Unapproved options are taxed as income on the gain at exercise; growth shares tax future growth largely as a capital gain.
- Giving equity does not change someone's employment status, but it can be one factor in an IR35 or status analysis.
- Advisor equity should still carry vesting and leaver terms, even for small stakes.
Can contractors and advisors receive share options at all?
Yes, but through a different door from employees. There is no rule against a company granting options or issuing shares to a contractor, advisor or non-executive director — it happens all the time.
What they cannot have is EMI. The tax-advantaged EMI scheme is available only to employees who meet the working-time requirement, so non-employees are outside it entirely.
That leaves two main routes: unapproved options and growth shares. Both are perfectly usable; they are simply taxed less generously than EMI. [More: EMI vs unapproved options — what's the difference?]
Why can't contractors get EMI?
Because EMI is built around employment. The scheme requires the holder to be an employee working at least 25 hours a week, or 75% of their working time, for the company or group.
A contractor engaged under a consultancy or services agreement is not an employee in that sense, however many hours they put in. The same goes for advisors and for non-executive directors whose role is board-only.
The working-time and employment tests are checked at grant, so there is no way to grant a valid EMI option to someone who is not an employee. [More: Who is eligible for EMI options?]
What can contractors and advisors use instead?
Two instruments do the job. Unapproved options give a right to buy shares later at a fixed price — flexible, quick, and open to anyone. Growth shares are actual shares that only participate in value above a hurdle, acquired cheaply now. [More: What are growth shares?]
For a small advisor stake, a modest unapproved option or a slice of growth shares with clear vesting is common. Advisors typically receive a fraction of a percent to a couple of percent, vesting over the engagement.
Whichever you use, put it in writing with vesting and leaver terms — an advisor who drifts away should not keep a full unvested stake. [More: Should advisors get equity — and how much?]
How are they taxed?
Less kindly than EMI, which is the price of the flexibility. An unapproved option granted to a contractor is generally taxed as income on the gain at exercise — the difference between the market value at exercise and the price paid — and the contractor usually accounts for it themselves, often through self-assessment.
Growth shares can be more efficient. Because they are worth little at the hurdle, the upfront value is low, and with a section 431 election within 14 days the future growth is taxed largely as a capital gain. [More: What is a section 431 election and why does the 14-day deadline matter?]
Neither gets EMI's exemption at exercise, so model the tax before promising a figure.
Does giving equity affect IR35 or worker status?
It can be a factor, though it is not decisive on its own. Employment and IR35 status turn on the whole relationship — control, integration into the business, mutuality of obligation — not on whether someone holds shares.
But giving a long-term contractor employee-style equity, alongside employee-style working patterns, can add to a picture that they are really an employee or inside IR35. If that matters, keep the contractor's arrangements genuinely those of a contractor.
Where someone is doing an employee's job, the cleaner answer is often to employ them — which also unlocks EMI. [More: Employee vs contractor — what's the legal difference (and where does IR35 fit)?]
| Recipient | EMI? | Usual instrument | Tax on the gain |
|---|---|---|---|
| Employee | Yes | EMI options | None at exercise if priced at market value |
| Contractor | No | Unapproved options or growth shares | Income at exercise; growth shares mostly CGT |
| Advisor | No | Unapproved options or growth shares | Income at exercise; growth shares mostly CGT |
| Non-executive director | No | Unapproved options or growth shares | Income at exercise; growth shares mostly CGT |
Worked example
Jen runs Hearthworks, a proptech startup, and wants to reward Sam, a freelance designer who has shaped the product over a year but works through his own company. Sam is a contractor, so EMI is out.
Jen grants Sam an unapproved option over 6,000 shares at their current £0.50 market value, vesting over two years. When Hearthworks is later acquired at £3.00 a share, Sam exercises and his £15,000 gain — 6,000 × (£3.00 − £0.50) — is taxed as income, which he reports through self-assessment.
Had Jen instead issued Sam growth shares over future value above a hurdle, with a section 431 election, more of that £15,000 could have been a capital gain. She takes advice on which suits Sam's situation before committing.
Where founders go wrong
Trying to grant EMI to a contractor or advisor.
It is invalid from the start — non-employees cannot hold EMI options, whatever the paperwork says.Ignoring the tax on unapproved options.
The contractor faces income tax on the gain at exercise; springing that on them at exit sours the reward.Blurring status lines.
Employee-style equity plus employee-style working can feed an IR35 or employment-status challenge — keep contractor arrangements genuinely contractor-like.Skipping vesting for advisors.
A small stake with no vesting means an advisor who disappears keeps it all; always attach vesting and leaver terms.
Related questions
Can a contractor get EMI options?
No. EMI is only for employees who meet the working-time test. A contractor engaged under a consultancy or services agreement is not an employee for EMI purposes, so they cannot hold EMI options — even if they work substantial hours for you. [More: Who is eligible for EMI options?]
What can advisors receive instead of EMI?
Usually unapproved options or growth shares. Both can go to non-employees. Unapproved options give a right to buy shares later, taxed as income on the gain at exercise; growth shares are acquired now and share only in future value above a hurdle, taxed largely as a capital gain. [More: What are growth shares?]
How are a contractor's share options taxed?
Unapproved options granted to a contractor are generally taxed as income on the gain at exercise, and the contractor accounts for it — often through self-assessment — rather than through payroll. Growth shares can be more efficient, taxing future growth as a capital gain. [More: EMI vs unapproved options — what's the difference?]
Does giving a contractor equity affect their IR35 or employment status?
It can be a factor. Equity does not by itself make someone an employee, but the overall picture — control, integration, mutuality of obligation — determines status and IR35. Giving a long-term contractor employee-like equity alongside employee-like working arrangements can strengthen an argument that they are really an employee. [More: Employee vs contractor — what's the legal difference (and where does IR35 fit)?]
Should an advisor's equity be options or actual shares?
Both are used. Options (usually unapproved) defer the decision and the cost until exercise; growth shares give a stake now but need new articles and a valuation. For small advisor stakes, a simple unapproved option or a modest growth-share allocation with clear vesting is common. [More: Should advisors get equity — and how much?]
Rewarding a contractor or advisor with equity is straightforward — until the tax and status questions bite, and a well-meant grant leaves them with an income-tax bill or muddies their IR35 position. A SuLe solicitor can pick the right instrument and paper it cleanly. Book a free call about your option scheme and reward your non-employees without the nasty surprises.
Keep reading: EMI vs unapproved options — what's the difference? · What are growth shares? · Who is eligible for EMI options? · What is a section 431 election and why does the 14-day deadline matter? · Should advisors get equity — and how much? · Employee vs contractor — what's the legal difference (and where does IR35 fit)?
Primary sources: GOV.UK — Enterprise Management Incentives (EMIs)
