The November 2025 budget brought something truly positive for growing businesses.
From April 2026, the Enterprise Management Incentive (EMI) scheme – widely regarded as the most tax-efficient way to reward employees with equity – becomes available to far more companies.
If you’ve been locked out of EMI because you’ve grown past 250 employees or accumulated more than £30 million in assets, this changes your options. The new thresholds double the employee limit to 500 and quadruple the asset threshold to £120 million.
For business owners trying to attract senior talent or retain experienced staff, this matters.
How Share Options Work
If you’ve never used share options before, the basic concept is straightforward.
Instead of giving employees shares in your company directly, you give them the option to buy shares at a fixed price (the “exercise price”) at some point in the future.
Here’s how it works in practice. Say you run a digital agency currently valued at £800,000:
- You grant your Senior Account Manager options to buy 5,000 shares at 50p each
- Those options vest over four years, meaning they earn the right to exercise them gradually
- Three years later, you’ve won several major clients and the business is worth £2 million – shares are now worth £1.25 each
- Your Account Manager exercises their vested options, paying 50p per share for something worth £1.25
- They’ve made a 75p per share gain – £3,750 in total – without you having to pay out cash
- When they eventually sell those shares (perhaps when you exit or bring in investors), they pay tax on the profit
The appeal for smaller businesses is clear. You can compete for talent with larger competitors without burning through cash reserves.
A £45,000 salary plus meaningful equity often beats a £50,000 salary alone, especially if the person believes in your company’s growth potential.
What Is EMI and Why Does It Matter?
For those who have never heard of it, the EMI scheme allows you to grant share options to employees with exceptional tax treatment.
When employees exercise their options and later sell shares, they pay Capital Gains Tax (CGT) rather than income tax on their gains.
Compare that to income tax rates of 40-45% for higher earners, and you see why EMI is valuable. It’s not about being generous – it’s about making equity grants genuinely worthwhile. When the tax treatment is this favourable, equity becomes a meaningful part of compensation rather than a token gesture.
The limits matter too. You can grant up to £250,000 per employee, and the company-wide limit is now £6 million in unexercised options. That’s double what it was before, giving you real capacity to make substantial grants to key people.
Who Benefits From the Expansion?
The changes help specific types of businesses that were previously excluded. If you’re in any of these situations, the expansion opens up options you haven’t had access to before.
- Growing service businesses: Professional services firms, tech companies, and consultancies that have scaled past 250 employees can now use EMI. Many of these businesses found themselves in an awkward position – too large for EMI but still competing for talent with smaller companies that could offer it.
- Capital-intensive companies: Businesses in manufacturing, biotech, cleantech, or any sector requiring expensive equipment or facilities often hit the old £30 million asset threshold well before reaching 250 employees. A manufacturing business with 150 staff but £40 million in machinery and inventory was locked out. The new £120 million threshold fixes this.
- Established scaleups: Companies that have been through multiple funding rounds and accumulated assets through growth – not acquisitions – often found themselves disqualified despite still needing to hire aggressively. The expanded limits give them several more years of EMI eligibility.
KMPG estimates these changes will support around 1,800 scaleups over the next five years, affecting roughly 70,000 employees.
For context, that’s companies at the upper end of the growth curve who’ve previously had to rely on less tax-efficient schemes.
How EMI Compares to Other Options
Before the expansion, companies that outgrew EMI had to switch to Company Share Option Plans (CSOP) or unapproved options. Both work, but neither offers the same tax advantages.
CSOP has a much lower individual limit – £60,000 per employee versus £250,000 for EMI. Gains are taxed at standard Capital Gains Tax rates of 24%, not the preferential 10-14% available through EMI’s Business Asset Disposal Relief. For senior hires expecting substantial equity packages, that difference adds up.
Unapproved options are even less attractive. Employees pay income tax and National Insurance on the gain when they exercise, which can result in an immediate loss of 40-47% of the value. Even if shares later appreciate, the initial tax hit makes unapproved options far less appealing.
The expansion means you can stick with EMI for longer, avoiding the need to downgrade to these less tax-efficient schemes as you grow.
What You Need to Qualify
EMI has qualifying conditions beyond the size thresholds. Your company must be trading – not holding investments as a primary activity. Certain sectors are excluded entirely: property development, financial services, legal and accountancy services, shipbuilding, coal and steel production, and businesses deriving substantial income from royalties or licence fees.
Your articles of association must permit the creation of the appropriate share classes. Most standard articles do, but it’s worth checking before proceeding.
Employees must work at least 25 hours per week or 75% of their working time for the company, and they must be subject to UK tax and National Insurance.
The process involves getting a share valuation that HMRC will accept. For private companies, this means commissioning a formal valuation from a qualified professional. HMRC offers advance clearance on valuations, which most companies pursue to avoid disputes later. Allow several weeks for HMRC to review and approve the valuation.
Read more about the EMI on the government website here.
Practical Steps if You’re Considering EMI
Getting EMI operational takes time. Most companies need 2-3 months from initial decision to first grant. The work breaks down into several areas.
First, confirm you meet all qualifying conditions. Run through HMRC’s eligibility criteria carefully – getting this wrong invalidates your entire scheme. Second, commission a share valuation and seek HMRC advance agreement on the figure. Budget for professional fees here; valuations for EMI purposes require specific expertise.
Third, design your scheme. Decisions about vesting schedules, exercise prices, and how much equity to grant to different roles affect how attractive your package is and how well it aligns with business objectives. Standard vesting is four years with a one-year cliff, but EMI allows flexibility if you have reasons to structure differently.
Fourth, prepare the legal documentation. Option agreements must comply with EMI requirements, your board needs to formally approve the scheme through a resolution, and you may need amendments to your articles of association. This isn’t work to handle without legal input – template documents from the internet rarely fit properly.
Finally, set up proper administration. You need accurate records of who has options, when they vest, when they’re exercised, and what happens when people leave. Manual spreadsheets become unmanageable quickly and increase the risk of errors that could invalidate options or create unexpected tax charges.
Common Mistakes to Avoid
Several mistakes appear repeatedly with EMI implementation. Companies sometimes grant options before securing HMRC valuation approval, which can invalidate the entire grant. Others fail to verify whether employees meet working-time requirements, particularly for part-time staff or those with multiple employers.
Documentation problems cause issues too. Option agreements that don’t comply with EMI requirements mean options don’t qualify for the tax advantages. Failing to issue option certificates promptly or not keeping accurate records of grant dates creates problems during due diligence or when employees want to exercise.
Communication failures are common as well. Employees who don’t understand what they’ve been granted, how vesting works, or what the tax treatment means won’t value their options properly. Clear explanation from the outset makes equity meaningful rather than confusing.
How Double Point Can Help
Setting up and managing an EMI scheme involves tax planning, compliance with HMRC requirements, and ongoing administration.
We can help you determine whether your company qualifies, obtain the necessary HMRC valuations and approvals, structure your scheme to align with your business objectives, and handle the ongoing reporting requirements. We also work with your legal advisors to ensure all documentation meets EMI requirements.
If you’re interested in exploring EMI for your business, book a consultation with us at Double Point.
We’ll review your circumstances, explain your options, and help you make informed decisions about employee equity that work for your company and your team,