• Enterprise Management Incentive (EMI) options: 
  • are a government backed scheme for growing companies to give key employees a real stake in their business.
  • benefit from favourable tax treatment for employees and are specifically designed for smaller trading companies.
  • give selected employees the right to acquire shares in the future, typically at today’s price, meaning that when the company grows, so too does the value of the employee’s shares. 
• In the most recent budget, the government introduced changes to the thresholds for companies to qualify for EMI schemes. The figures in these slides reflect the position before 6th April 2026, but we’ve included in a single slide which sets out all the changes in one place. 

What are the benefits of EMI Options?

• EMI options can: 
  • be a useful way to incentivise key employees or teams by linking their rewards with the company’s long-term success;
  • make it easier for smaller businesses to attract and retain talented employees;
  • Help to create a culture of shared ownership, personal investment and long-term thinking.

Tax Treatment 

• There is no income tax liability on the grant of an EMI option.
• If the exercise price is at least equal to the market value at grant, the employee will not need to pay any income tax or national insurance.
• Employees will still need to pay capital gains tax when the options are exercised, but this will only be on the amount that the share values have increased by since the option was granted.
• A corporation tax deduction may be available when EMI options are exercised, equal to the gain made by the employee. 

Who and what qualifies?

Company criteria: 

• EMI options may be granted by independent trading companies (or parent companies of trading groups) with less than:

• £30 million in gross assets; and 
• 250 full-time equivalent employees at the date of the grant.
• £3 million (in market value) worth of shares held under EMI options.

• Companies must also have: 
  • only qualifying subsidiaries; and 
  • a UK permanent establishment within the trading group.

Employee criteria: 

• There are also special requirements for employees to be eligible, they must:

work at least 25 hours per week or, if less, 75% of their working time for the company or group.

• Employees do not qualify if they are:
  • a non-executive director; and/or
  • providing services via their own company; and/or
  • have a material interest in the business.

Exercise and Lapse of Options

• EMI options must be exercisable within ten years of the grant date, with flexibility for exit-only arrangements or performance-based exercises. 
• Options typically lapse when the employee leaves or the option holder becomes bankrupt, with provisions for early exercise in certain circumstances.

Upcoming Changes – from 6th April 2026

It was announced in the November 2025 budget that the EMI limits will formally change, to allow more companies to use the scheme. The changes are as follows:

• The cap on the value of gross assets will increase to £120 million or less.
• The cap on the value of the shares held will increase to £6 million.
• The maximum number of employees will double to 500.
• The maximum holding period (i.e. how long the options can be held and exercised) will increase to 15 years. 

A well-implemented EMI scheme balances retention power and tax efficiency while fitting seamlessly with your business funding plans. 

To explore whether EMI is right for your business and to design a scheme tailored to your goals, please contact our corporate team. 

Article written by Sophia Frost, Corporate & Commercial Paralegal and Becky Stephenson, Corporate & Commercial Solicitor – Aquabridge Law, Felixstowe, Suffolk & Colchester, Essex

www.aquabridgelaw.co.uk