What is an Enterprise Management Incentive?
An Enterprise Management Incentive (EMI) scheme is a statutory, tax‑advantaged share option scheme designed to help small and medium‑sized companies recruit, incentivise and retain key employees.
An EMI scheme allows companies to grant employees the option to acquire shares at a fixed exercise price, approved by HMRC, in the future. These options are typically exercised:
- on an exit event, such as a sale of the company;
- after a specified vesting period; and/or
- when certain performance criteria is met.
Provided the statutory conditions are met, EMI options offer significant tax advantages for both employees and employers, making them one of the most attractive equity incentive arrangements available to UK companies which wish to grow. They also became increasingly popular to incentivise employees, without the need for cash bonuses.
What qualifies a company under the previous law
Prior to 6 April 2026, a company only qualified to grant EMI options if:
- it had fewer than 250 full‑time equivalent employees;
- it had gross assets of no more than £30 million; and
- the total unexercised EMI options were worth no more than £3 million.
In addition, EMI options generally had to be exercised within 10 years of grant to retain their tax‑advantaged status.
Whilst effective, these restrictions no longer reflected the commercial realities of modern scale‑ups, particularly in sectors requiring significant capital investment or longer exit horizons.
What is changing from 6 April 2026?
With effect from 6 April 2026, the Government has significantly expanded the EMI eligibility limits. The most impactful changes are:
- Employee limit increased – The employee limit increased from 250 to 500 full‑time equivalent employees. This will allow larger companies (specifically those who are scaling up) to exercise a more tax efficient option with EMIs.
- Gross assets threshold increased – The gross assets limit increased from £30 million to £120 million, substantially widening the pool of eligible companies.
- Larger company‑wide option pool – The cap on the total value of unexercised EMI options doubled from £3m to £6m.
- Extended exercise period – The maximum period during which an EMI option can be exercised without losing tax‑advantaged status increased from 10 years to 15 years. This extension can also apply to existing EMI options that have not yet expired or been exercised, provided amendments are made in line with the new legislation.
Why do these changes matter?
The increase to the gross assets and employee limits mean that many growing companies that previously fell outside the EMI regime will now qualify. This is particularly beneficial for scale‑ups that had outgrown the old thresholds and were forced to rely on less tax‑efficient alternatives such as Company Share Option Plans (CSOPs) or unapproved option arrangements.
The extension of the exercise period to 15 years provides greater flexibility for both companies and employees, better reflecting longer growth and exit cycles. Companies with existing EMI arrangements should consider whether their option
If you have any questions in relation to the matters discussed in this article or would like to hear more about EMI schemes or other employee incentive arrangements, please do not hesitate to get in touch.
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Disclaimer
This information is intended for general informational purposes only and does not constitute legal advice. We recommend seeking professional advice before taking any action on the information provided. If you would like to discuss your specific circumstances, please feel free to contact us on 0800 2800 421.
