[CHY872]

Firstly, work out how much your 0.2% equity is likely to convert into. You'll probably pay income tax and employers NI on them (and in one year!) and so you'll likely end up paying 55% tax on them. How much do the founders think the company is worth right now? If it's close to £500M, that's a big part of your comp. If it's close to £50M, it's not.

Next, work out where you want to be in terms of comp in a few years, rather than thinking of how to optimise the cash right now. For example, I'd stop worrying about your tax-free allowance gradually disappearing, and instead try to work out how to get it to all be gone. In 5 years, the person who makes £120k is £40k better off than the person who makes £100k, after tax. That... sounds worth it. And it's usually easier for the person who's getting paid £120k to get paid £130k than it is for the person who's getting paid £100k. This is to say, having high tax brackets is a benefit, not a curse.

And then, it's probably worth noting - this isn't directly their money, especially if they're looking to sell. It's probably worth having the conversation of like, 'what would I need to do in order to justify £100k/year?'. Or, alternatively, negotiating on the vesting of your stock, since that's effectively free. If they think the company is going to be sold in the next few years, that's a relatively small giveaway for you. If the company's grown a lot in four years, it's unlikely a significant increase in stock is on the table.

Don't overestimate how long it'd take a good new person to catch up. I've rarely seen a role where a new person can't be effective within 6 months.

[MattPalmer1086]

Isn't equity taxed as capital gains, not income, when you sell it?

[CHY872]

No, you (generally) pay income tax on the current value when you receive it, and then capital gains on any change in value.

Essentially, if I pay you £15k for some services, you pay income tax on that £15k. If I buy you a car for £15k, taxman still wants £15k. Same with equity.

How it can work is that you can be granted shares and pay the taxes at time of granting (which for a founder is zero), but might not be nice for an employee.

You can also give an employee options, and this can get complicated (single or double vest).

But in general, for any equity instrument in a stock plan, you get charged income tax at one stage, then capital gains at a later stage, and you can trade off when you want to trigger each. In this case, employer has gone for a model where income tax is deferred as late as possible.