Changes to Enterprise Management Incentive (EMI)

From 6 April 2026, significant changes to Enterprise Management Incentive (EMI) share options were introduced, opening up this advantageous tax incentive plan to a broader range of companies.

What is EMI?

An EMI scheme is a tax-advantaged share scheme, which allows companies to give options over shares to selected employees to incentivise and retain them. Under an EMI, an employee is granted an "option", which is a right to acquire shares in the future. Where the option price reflects the market value of the shares at the date the option was granted, no income tax nor national insurance contributions (employee or employer) arise on the grant or exercise of a qualifying EMI. Capital gains tax could still arise on a later sale of the shares, but relief may apply to reduce the rate of capital gains tax that will apply.

Whilst EMI is often considered the most flexible tax advantageous share option plan for qualifying companies, there are qualifying conditions which both the company and the employee needs to meet and therefore not all companies are eligible to grant EMI options to its employees.

For more information about EMI and qualifying criteria, click here to view our interactive guide.

What is changing?

From 6 April 2026 the eligibility limits for EMI are extending as follows:

The cap on the number of employees a company establishing an EMI plan can have is rising from 250 to 500.

The company gross-assets limit increases from £30 million to £120 million.

The overall limit on the value of shares under option has doubled – increasing from £3 million to £6 million. The limit applying to an individual employee remains at £250,000.

The maximum holding period during which an option can remain unexercised without losing the tax benefits is extending from 10 years to 15. This will apply to existing EMI options, not just new grants.

These changes to the eligibility limits for EMI schemes increase the size of the company that can now qualify for EMI. This opens EMI up to more companies, and also means that growing companies will be able to grant EMI options for longer.

The extension of the maximum holding period for an EMI option from 10 years to 15 is also a welcome change. Previously EMI options were required to be capable of being exercised within 10 years from the date of grant and the option needed to be exercised within this 10-year period for EMI tax treatment to be available on exercise. Extending this period to 15 years allows more breathing space for the exercise of options under EMI schemes, particularly for exit-based schemes (which allow for exercise only on certain transactions), which may otherwise have reached the end of the 10-year period without an exercise. This extension therefore offers a greater period over which options can exercise. It also means that option holders can potentially benefit from the growth in value of the underlying shares over a longer period.

There may be opportunity for options granted prior to 6 April 2026 to be amended to extend the option period from 10 to 15 years. If you have an existing scheme in place and are considering extending this holding period in line with the new legislation, we recommend taking advice on whether you can do so without losing EMI tax advantages.

Further changes expected from April 2027

Further changes to EMI are expected to come into effect from April 2027.

Currently if an EMI option is not notified to HMRC by the 6 July following the tax year in which the option was granted, it will not qualify for EMI and the tax benefits cannot be recovered.

The government has announced that they expect to remove this requirement to notify the grant of EMI options from April 2027. This is likely to be a welcome change for EMI users. Historically this requirement has caused issues for companies where on exercise of otherwise qualifying options, it is discovered that their option holders will miss out on the EMI benefits due to a failure to notify the grant of EMI options within the required time limits.

For more information about the recent changes to EMI, click here.

How Brodies can help?

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 contact one of our Corporate Tax & Incentives team.