Enterprise Management Incentives (EMI) provide a tax-advantageous way for smaller, high-growth companies to attract and retain key staff by offering them an ‘option’ to acquire shares in the company in the future.
Under the existing rules, companies qualify to grant EMI options to staff if they have fewer than 250 full-time equivalent employees and gross assets not exceeding £30 million.
The government, in its November Budget, in a welcome move, made significant changes to EMI schemes, opening the incentive scheme to much larger businesses.
From April 2026, the following changes will apply:
- The cap on the number of employees will increase from 250 to 500.
- The gross-assets limit increases from £30 million to £120 million.
- The overall limit on the value of shares under option has doubled, increasing from £3 million to £6 million. The limit applying to an individual employee remains at £250,000.
- The maximum holding period during which an option can remain unexercised without losing the tax benefits will extend from 10 to 15 years. This will apply to existing EMI options, not just new grants.
The government also announced that the requirement to notify the grant of EMI options will be removed from April 2027. Currently, if an EMI option is not notified to HMRC by 6 July following the tax year in which the option was granted, it will not qualify for EMI and the tax benefits cannot be recovered.
How EMIs incentivise employees
EMI schemes allow UK companies to grant selected employees the right (but not the obligation) to acquire shares in the future at a price set at the time of grant. Because options are not shares until exercised, employees do not need to pay anything upfront and can wait to see how the business performs before deciding whether to acquire the shares.
To qualify, both the company and the employee must meet certain conditions. The company must (among other requirements) carry on a qualifying trade, be independent, and fall within size limits. Employees must work at least 25 hours per week (or, if less, at least 75% of their working time) for the company. The options themselves must also meet statutory conditions, for example, they must be exercisable within a maximum period, and each individual can hold only up to a specified value of EMI options.
The key attraction of an EMI scheme is the favourable tax treatment. For employers, EMI schemes provide a flexible and cost-effective way to reward and motivate employees, align incentives with long-term company growth, and compete for talent without large cash outlays.
To understand how Bishop & Sewell can help, we have created a more detailed guide to EMI Schemes here.
Speak to our Enterprise Management Incentives solicitors today
For initial advice, contact our Corporate Commercial team by email company@bishopandsewell.co.uk or call us on +44 (0)20 7631 4141.
Alternatively, you can email Ionut Florin Tihulca, Associate Solicitor, directly by emailing itihulca@bishopandsewell.co.uk.
