Top tips for employers considering the Enterprise Management Incentive (EMI) scheme

The Enterprise Management Incentive (EMI) scheme is a tax-beneficial share options arrangement used for attracting and retaining key employees, while protecting owner-managers from over dilution. EMI is a popular option for business owners because of the generous tax reliefs available and the limited upfront cost to the business.

For employers considering EMI, understanding both the current rules and upcoming changes is essential to ensure your scheme delivers maximum value.

How is EMI changing in 2026?

The 2025 UK Budget announced a series of proposed reforms to EMI, expected to take effect from 6 April 2026. These changes are designed to broaden the scheme’s accessibility and increase its flexibility, making it more attractive to a wider range of relevant businesses.

Subsequent government guidance provides further detail on these reforms:

Gross assets limit: The company’s total gross assets can now be up to and including £120 million to qualify for EMI, increased from the previous limit of £30 million.
Employee limit: The company can now have less than 500 employees under the EMI rules, up from the previous limit of less than 250 employees.
Total value of unexercised EMI options: The total value of shares for which unexercised qualifying EMI options exist will rise from £3 million to £6 million. This value is calculated based on the unrestricted market value of option shares at the time relevant options are granted.

For eligible companies, further changes will apply to EMI contracts granted on or after 6 April 2026. These may also apply retrospectively to existing EMI contracts that have not yet expired or been exercised:

Exercise period extension: The maximum period over which options may be exercised will increase from 10 years to 15 years. Existing contracts can be amended to reflect this change without losing the scheme’s tax advantages, in line with the legislation. This increased horizon will help support longer-term employee engagement and retention.
EMI notification requirement: From April 2027, companies will no longer be required to notify HMRC of EMI option grants. This will be implemented through the Finance Bill 2026-27. Removing this requirement brings a welcome administrative simplification.
PISCES reform (Private Intermittent Securities and Capital Exchange System): The government will allow existing EMI and CSOP contracts to be amended to include PISCES as an exercisable event. This will also be legislated in Finance Bill 2026-27, apply to contracts agreed before 6 April 2028, and take effect retrospectively from 15 May 2025.

Other qualifying conditions, such as carrying on a qualifying trade and maintaining independence, remain unchanged.

Important: These are proposed changes and will only apply once legislation comes into effect. Until April 2026, companies must continue to operate under the current thresholds. It’s essential to communicate clearly with your stakeholders to avoid confusion between the current rules and upcoming changes.

Why should I consider EMI?

An EMI scheme incentivises employees by giving them a stake in the company’s growth while offering generous tax reliefs and limiting shareholder dilution. For growth-stage companies, particularly startups and scale-ups, EMI is a compelling tool to attract and retain talent. With the proposed 2026 changes, more companies will be able to take advantage of EMI, broadening its reach as a valuable incentive.

However, business owners and/or shareholders should have a clear strategy and commercial rationale for putting the scheme in place and understand what the right mechanism is for achieving those aims. EMI works best when the value of the business is expected to increase significantly, giving option holders confidence that they will benefit in the future. If this isn’t the case, other incentives, such as bonus schemes, may make more commercial sense for motivating employees.

Who is eligible for EMI?

EMI is one of the more flexible incentive schemes, but there are criteria that both companies and employees must meet. Currently, EMI is available to most businesses except those operating in HMRC-designated “excluded trades” or exceeding size requirements.

From April 2026, these thresholds will increase:

Current: businesses with <250 employees
From April 2026: businesses with <500 employees

Employees must work at least 25 hours per week (or 75% of their working time) for the company and hold less than 30% of the company’s shares. Other considerations, such as venture-backed structures or joint ventures, may affect eligibility, so professional advice is recommended if there is any uncertainty.

How should I plan my EMI scheme?

Designing and implementing an EMI scheme takes time, especially if HMRC clearance is required to confirm company eligibility. Planning should allow sufficient time to:

Define objectives
Agree beneficiaries
Set terms and conditions
Conduct valuations
Grant options

Engaging quality tax and corporate finance advisers can save management time and ensure the scheme aligns with the business’s wider growth strategy. Involving an employment lawyer can also ensure EMI arrangements do not conflict with employment contracts or director service agreements.

Pricing share options correctly is critical. Both Unrestricted Market Value (UMV) and Actual Market Value (AMV) of the shares must be calculated and agreed with HMRC before options are granted. This process typically takes 2-4 weeks, and the agreed valuation is valid for a 90-day granting period.

Where can I find expert advice on EMI schemes?

An EMI scheme incentivises employees by giving them a stake in the company’s growth, while offering generous tax reliefs and limiting shareholder dilution. Its popularity is understandable, but the details must be carefully planned for each situation to ensure maximum benefit.

If you are designing a package to attract key team members or considering the best way to incentivise existing employees, consult a suitably qualified adviser. Our Tax and Strategic Corporate Finance teams can provide guidance tailored to your business needs.

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.

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