An EMI options scheme is HMRC’s tax-advantaged share option arrangement for UK companies and remains the sharpest tool available for rewarding staff without triggering income tax on exercise. From 6 April 2026, the eligibility limits widen substantially, meaning many scale-ups that outgrew EMI can now qualify again.
TL;DR:
- Companies with assets up to £120 million and fewer than 500 employees now qualify for EMI, reopening eligibility for many scale-ups post-2026.
- The £6 million limit on unexercised options and the asset and employee thresholds greatly expand the size and scope of qualifying businesses.
- Maintaining ongoing qualification requires strict adherence to tests, especially the working time rule, which often trips up schemes if not carefully managed.
- Proper setup involves a formal valuation, timely HMRC notification within 92 days, and continuous compliance, as disqualifications can occur from restructures or changes in activity.
- Implementing the scheme before funding rounds and regularly rechecking eligibility under new limits can prevent losing the tax advantages or having the scheme invalidated.
Enterprise Management Incentives let a qualifying company grant share options to employees at market value. Exercise typically produces no income tax or National Insurance liability, and any gain on sale is taxed as a capital gain rather than salary. That distinction routinely saves higher-rate taxpayers tens of thousands of pounds compared with an unapproved grant, because CGT rates sit well below income tax and employee NIC combined.
From 6 April 2026, the government raised the thresholds that decide who can use the scheme at all:
These changes mean a business with substantial assets and several hundred staff, which would have failed the old test outright, now qualifies comfortably. That’s a real shift for later-stage scale-ups that had been forced into CSOP or unapproved options simply because they’d grown past the old ceiling. Recruiters competing for engineering talent against larger rivals get a genuine lever back.
Before granting a single option, check the company itself passes HMRC’s tests. Miss one and every option granted under the scheme risks losing its tax-advantaged status.
Founders setting up a new entity structure should map this against their share structure before drafting a single option agreement.
Two limits govern individual participation. Each employee’s unexercised EMI options can’t exceed £250,000 in market value across a rolling three-year period, and the company as a whole can’t exceed its £6 million cap.
The working time requirement trips up more schemes than any other test.
Pro Tip: Keep a simple working-time declaration on file for every option holder at grant date. It’s the single easiest piece of evidence to produce if HMRC ever queries a disqualifying event years later.
Tax treatment is where EMI earns its reputation. Grant itself is not a taxable event provided the option is set at market value. Exercise triggers no income tax or employer NIC either, as long as the exercise price equals the market value agreed with HMRC at grant. Sell the shares later and the entire gain falls under capital gains tax, not income tax.
Two situations break that clean outcome. If options are granted at a discount to market value, the discount itself is taxed as income on exercise. And if a disqualifying event occurs and the option isn’t exercised within 90 days of it, favourable tax treatment can be lost on the portion of gain accrued after that point.
Business Asset Disposal Relief can cut the CGT rate further on qualifying disposals, though EMI shares get special treatment: the usual 5% shareholding and two-year holding period tests are relaxed, since the option holding period itself counts.
| Factor | EMI option | Unapproved option |
|---|---|---|
| Tax at exercise | Usually none | Income tax + employer/employee NIC on full gain |
| Tax at disposal | CGT, often with BADR available | CGT on any further gain after exercise tax |
| Individual limit | £250,000 market value | No statutory limit |
| Commercial flexibility | Constrained by qualifying tests | Fully flexible |
Take an employee granted options over shares worth £100,000 at grant, exercised and sold for £300,000. Under EMI, the £200,000 gain is taxed entirely as a capital gain, potentially at the BADR rate. Under an unapproved option, that same £200,000 would typically be taxed as income first through PAYE and NIC, then any further appreciation as CGT, a materially worse outcome for the employee and a National Insurance cost for the employer too.
Setting up EMI is a process, not a one-off document. Get the sequencing wrong and the whole scheme’s tax status is at risk.
Pro Tip: Save a PDF or screenshot of every HMRC notification confirmation the moment you submit it. Investors’ due diligence teams ask for this evidence routinely, and HMRC’s online portal doesn’t always resend confirmations on request.
EMI status isn’t a box ticked once at grant. It has to hold continuously, and several everyday business events can quietly break it.
EMI suits companies that meet the qualifying tests and want the strongest tax outcome for staff, full stop. Where a business fails the independence or excluded-activities test but still wants tax-advantaged options, a Company Share Option Plan is the fallback, though its £60,000 individual cap is a fraction of EMI’s £250,000.
Implement EMI before a valuation step-up, not after. A grant locked in ahead of a funding round fixes a lower exercise price and maximises the CGT-taxed gain employees eventually keep. Some scale-ups run a hybrid: EMI for the bulk of the team, unapproved options layered on top for senior hires who exceed the £250,000 individual cap.
Price & Accountants has spent more than 40 years handling company tax structuring, and EMI sits alongside SEIS and EIS as one of the schemes we’re asked about most by tech founders preparing for a funding round. Getting the valuation right at grant, and notifying HMRC within the 92-day window, are the two steps that decide whether a scheme survives its first HMRC review. A typical setup, from valuation to first grant notification, runs four to six weeks when the cap table is already clean. Expect an option agreement, a board resolution, a valuation summary and the HMRC notification confirmation as the core paper trail your adviser prepares.
Most commentary on the April 2026 changes treats them as a technical footnote: bigger numbers, same scheme. That undersells what actually happened. A company sitting at £90 million in gross assets with 350 staff was, until recently, one funding round away from losing EMI eligibility entirely. Now it has genuine headroom, which changes the calculus on hiring, retention packages and even the timing of a Series B.
The conventional advice, “grant options early, worry about eligibility later”, still holds, but it misses the bigger point: eligibility isn’t a one-time hurdle, it’s a condition you have to keep clearing every year the scheme runs. Businesses that treat their EMI status as fixed at launch are the ones that get caught out by a control change or a quiet drift into an excluded trade three years later.
If there’s one priority for founders reading this before a raise, it’s this: run the qualifying tests again now, under the new limits, even if you checked them last year. The rules moved. Your eligibility might have moved with them, in either direction.
— Rahamut
If you’re weighing EMI against CSOP, or simply unsure whether your headcount and asset base clear the new April 2026 limits, that’s exactly the kind of question worth answering before term sheets are on the table, not after. Price & Accountants designs EMI schemes end to end: valuation liaison with HMRC, option agreement drafting alongside your legal team, the formal HMRC notification within the 92-day window, and the annual ERS returns that keep the scheme compliant year after year.
We also handle the director-level tax planning that tends to run alongside a scheme launch, since founders granting themselves options usually need that reviewed at the same time. If a funding round is on the horizon, book a diagnostic eligibility check with our strategic advisory and tax planning team now, while there’s still time to structure grants before your valuation moves.
This article is general information, not a substitute for advice from a qualified financial advisor. Consult a qualified financial professional about your own circumstances before acting on anything here.
