5 costs in a UK funding round, from legal fees to dilution

What to take away

The five cost components of a UK funding round

A UK raise has five cost components that matter for budgeting. Legal fees, HMRC advance assurance and scheme administration, platform or intermediary fees, accountancy and compliance, and dilution. Each behaves differently. Four are cash. One is ownership.

Founders usually budget the first and forget the fifth. That is backwards. Dilution is often the largest single cost of a round, and it is the one you cannot renegotiate after completion.

Cash costs are easier to control. You can cap legal spend, negotiate platform terms and keep filings tidy. Dilution depends on valuation, round size and how much you raise against how much you keep.

Each line below carries pound figures where published levels exist. Where a number is a market norm rather than a published tariff, it says so.

That table is the whole subject in miniature. The rest of this piece puts process and detail around each line.

If you want the underlying fee data assembled in one place, our guide to budgeting startup funding costs from dated official fees sets out where each figure comes from.

Legal fees: what a UK round actually costs in GBP

Legal fees are the line founders ask about first, and the one where a pound estimate is genuinely useful.

For a straightforward SEIS or EIS round with a handful of angels signing standard documents, company-side legal fees commonly land between GBP 3,000 and GBP 8,000. That range covers a solicitor preparing the subscription agreement, articles, board minutes and the share issue paperwork.

A priced round with a lead investor and full due diligence sits well above that. Company-side legal costs of GBP 15,000 to GBP 25,000 are common, and larger rounds go higher. Diligence itself, plus negotiation of an investment agreement and revised articles, drives most of the increase.

Investor-side legal fees are a separate matter. In smaller rounds the company often covers them, capped at somewhere between GBP 2,000 and GBP 7,500. In larger rounds the investor pays their own. Establish which convention applies before you sign a term sheet, because it changes your budget by thousands.

A cap on company-side legal spend is standard practice and worth insisting on. Ask your solicitor for a fixed fee or a capped estimate in writing. Unbounded hourly billing on a round that drags is how legal costs double.

Legal work does not stop at completion. Post-completion filings, share issue records and updated cap table documents all carry cost. Companies House is the registry for those filings, and its role in recording share issues means every allotment creates paperwork with a fee attached.

HMRC advance assurance and scheme administration costs

Advance assurance is the process where HMRC confirms, before you raise, that your company and proposed shares look eligible for a venture capital scheme. The application itself carries no HMRC fee. Applying is free.

The cost is in the preparation. HMRC sets out the advance assurance application process and what it expects to see, including your business plan, financial forecasts and details of the shares you intend to issue.

Most founders use an accountant or adviser to prepare the submission. That professional time typically costs GBP 500 to GBP 1,500 for a clean single-entity trading company with straightforward forecasts. Group structures, prior funding rounds and mixed trading activities push it towards GBP 2,500 or GBP 3,000.

Advance assurance is not the same as the investor claiming relief. The company applies to use the scheme, and investors then claim their own relief on qualifying shares. The official route for raising money through a venture capital scheme explains how the two sides fit together.

If you intend to use EIS, the company-side application and compliance requirements are set out in the guidance on how to apply to use the Enterprise Investment Scheme. Read it before you instruct anyone, so you are paying for advice rather than for someone to read the rules to you.

Scheme administration does not end at assurance. You will issue compliance certificates, keep records and answer investor queries at tax year end. Budget a few hundred pounds a year for that recurring administrative time.

Platform and intermediary fees, with dated published levels

Platform and intermediary fees are where published levels exist, and where you should read the provider's current terms rather than rely on a remembered figure. These are the fees charged by equity crowdfunding platforms, angel networks, brokers and placement agents. They typically combine a completion fee with a share of the raise and, sometimes, a retainer.

Crowdcube and Seedrs (now Republic Europe) are the best-known UK equity crowdfunding platforms. Both have historically published completion fees in the region of 6% to 7% of the amount raised, sometimes with an additional fixed listing fee. On a GBP 250,000 raise, that is GBP 15,000 to GBP 17,500.

Angel networks and regional angel syndicates often charge a completion fee nearer 2% to 5%, sometimes with a retainer of a few hundred pounds a month credited against it. On the same GBP 250,000 raise, 3% is GBP 7,500.

Provider terms change, so confirm the current schedule before you model it. Treat any percentage here as a starting point.

What matters for your budget is the structure, not the headline. Ask three questions of every intermediary. Is there a retainer, and is it credited against the completion fee? Is the completion fee a percentage of the amount raised or a flat sum? Do investors pay their own platform fees, or does that come out of your proceeds?

Regulatory status matters too. Platforms and advisers that arrange investments or hold client money need authorisation, and the Financial Conduct Authority sets out the authorisation requirements that apply. An unauthorised intermediary is a cost risk, not a saving.

Some platforms also take a share of the upside through warrants or a carried interest in the company. That is dilution wearing a different hat, and it belongs in the dilution line of your budget, not the fees line.

For how these pricing structures differ across equity, debt and grant routes, see our breakdown of how startup funding is priced, from adviser fees to debt.

Accountancy, valuation and compliance costs

Accountancy costs in a round fall into three buckets. Preparation, valuation and ongoing compliance.

Preparation covers the work behind advance assurance, financial forecasts and the numbers in your data room. If your accounts are unaudited or behind, expect a catch-up bill before the round even starts. Budget GBP 1,000 to GBP 3,000 for a clean set of round-ready accounts and forecasts.

Valuation matters most when you issue shares to employees or advisers, or when you need a defensible price for a priced round. A formal valuation report commonly costs GBP 2,000 to GBP 6,000 and takes two to four weeks. Some rounds need it, many do not.

Ongoing compliance is the quiet one. Statutory accounts, confirmation statements, corporation tax returns and the share issue records that follow any allotment all continue after the round closes. Companies House filings are a recurring administrative cost, not a one-off event.

If your round includes an EMI option grant or refresh, add GBP 1,500 to GBP 4,000 for the valuation and scheme registration work. It is easy to leave out and awkward to fund later.

A worked example helps here. Suppose a company raises GBP 250,000 from angels on EIS terms. Legal fees come to GBP 5,000. Advance assurance preparation adds GBP 1,000.

Platform or network fees at 3% are GBP 7,500. Accountancy and filings cost GBP 2,000. Investor-side legal costs add GBP 4,000.

The total execution cost is GBP 19,500. Net proceeds are therefore GBP 230,500. The founder has given away the same equity as if they had banked the full GBP 250,000.

Dilution as a cost, measured against net proceeds

Dilution is the cost founders feel least and should count most. It is the share of the company you give away to receive the money, and it is permanent.

The right way to measure it is against net proceeds. Gross investment is a headline. Net proceeds are what lands in the company bank account after legal fees, platform fees, accountancy and any investor-side costs you agreed to cover.

Take the worked example above. Raising GBP 250,000 at a GBP 1 million pre-money valuation gives investors 20% of the company. Net proceeds of GBP 230,500 mean the founder sold 20% for GBP 230,500, not GBP 250,000. The effective dilution cost per pound of net proceeds is higher than the headline suggests.

A simple comparison shows why. If two rounds raise the same headline amount but one carries GBP 40,000 of execution costs and the other GBP 19,500, the founder has sold the same percentage for GBP 20,500 less money in the bank. The dilution is identical. The value received is not.

Dilution also compounds. A round that gives away a fifth of the company makes every later round more expensive in ownership terms. Founders who track dilution per pound of net proceeds make better decisions about round size than those who track headline valuations.

There is a second dilution cost that rarely appears on a term sheet. Adviser warrants, broker options and any carried interest all dilute existing holders. Our piece on easily missed startup funding costs, from board time to adviser tail fees, covers the ones that surface late.

For the full picture of what a raise costs once failure scenarios are included, see our guide to the cost of raising startup funding, from net proceeds to failure.

Building a round budget that includes delay and fallback costs

Most round budgets assume the round closes on schedule at the target amount. That assumption is wrong often enough to plan around.

Build the budget in steps.

Step five is the one people skip. A round that costs more than it returns in net proceeds is not a round worth closing.

Delay costs are real and underbudgeted. A round that takes three months longer than planned carries extra legal time, extra adviser time and often a bridge or extension cost on top. Put a number against delay before you need it.

Fallback costs are the other half. If the round comes in under target, which costs are fixed and which scale down? Platform fees that scale with the amount raised are friendlier than retainers that do not. Legal fees that were capped are friendlier than open-ended billing.

Our startup funding budget template covering dilution, delay and fallback turns these steps into a working model you can adapt.

Common questions

Is HMRC advance assurance free?

Applying is free. The cost is the professional time to prepare the submission, typically GBP 500 to GBP 1,500 for a straightforward company, plus the administrative work that follows.

Are legal fees or platform fees usually larger?

For most angel and SEIS or EIS rounds, legal fees are larger, often GBP 3,000 to GBP 8,000. Platform and intermediary fees tend to dominate only on larger crowdfunding raises or where a placement agent is involved.

How should I measure dilution cost?

Measure the percentage given away against net proceeds, not the headline amount raised. That shows what you actually sold and what you actually received for it.

Do I need a formal valuation for a funding round?

Not always. A priced round with a lead investor usually needs a defensible price, and any employee share scheme work needs one, at GBP 2,000 to GBP 6,000. Many angel rounds on standard terms do not.

What is the biggest budgeting mistake founders make?

Leaving out delay and fallback costs. Rounds slip, and a budget that only works if everything closes on time is not a budget.

Can costs be paid out of the raise itself?

Often yes, with the fees deducted at completion. Check the mechanics, because paying fees from proceeds reduces net proceeds and therefore changes your dilution calculation.