As one of the UK’s most tax-efficient employee share option plans, EMI schemes help businesses reward and retain employees while aligning their interests more closely with long-term growth objectives. Changes that came into effect from April 2026 have also made EMI schemes more accessible to a wider range of growing businesses.

What is an EMI Scheme?

An Enterprise Management Incentive (EMI) scheme is an HMRC approved share option arrangement that allows qualifying businesses to grant selected employees the option to acquire shares in the company at a future date, often at a price agreed when the option is granted. Therefore, if the value of the company grows over time, employees can benefit from the increase in share value, creating a strong incentive for them to contribute to the business’s success.

For employers, EMI schemes can be a powerful way to:

• Reward key employees
• Increase retention of senior talent
• Support recruitment efforts
• Align employee and shareholder interests
• Encourage long-term thinking and business growth.

Why are EMI Schemes So Popular?

EMI schemes have long been regarded as one of the most attractive employee share incentives available to UK businesses because of their flexibility and favourable tax treatment.

Provided certain conditions are met, employees can typically acquire and eventually dispose of shares without facing the income tax and National Insurance charges that often apply to other types of share-based remuneration. Instead, any growth in value is generally subject to Capital Gains Tax when the shares are sold.

The scheme allows businesses to offer staff a meaningful reward without significantly increasing payroll costs, while employees gain the opportunity to benefit financially from the equity value they help create.

What Changed in 2026?

The qualifying criteria for a business to be EMI eligible was expanded significantly, with the changes taking effect from 6 April 2026. These reforms were designed to enable more scale-up businesses to benefit from EMI arrangements and use them for a longer period as they grow.

Key changes include:

• The employee limit increased from 250 to 500 full-time employees
• The gross assets threshold increased from £30 million to £120 million
• The company-wide limit on unexercised EMI options increased from £3 million to £6 million
• The maximum option exercise period increased from 10 years to 15 years.

The changes mean that many businesses excluded from EMI schemes previously may now qualify, while companies already operating a scheme may have additional flexibility in how they structure future incentives.

Does Your Business Qualify?

To operate an EMI scheme, a company must meet a number of conditions.

Broadly, qualifying companies must:

• Have gross assets of £120 million or less
• Employ fewer than 500 full-time equivalent employees
• Carry on a qualifying trade
• Be independent and not controlled by another company.

Certain activities are excluded from EMI eligibility, including banking, farming, property development and some financial services activities.

Employees must also satisfy specific requirements, including working at least 25 hours per week for the company or spending at least 75% of their working time on the business. Individual employees can generally hold EMI options with a market value of up to £250,000.

Is EMI Right for Your Business?

EMI schemes are particularly attractive for owner-managed businesses, scale-ups and fast-growing companies looking to retain key people while preserving cashflow.

Every scale up is different, however, businesses are more likely to consider EMI schemes if they:

• Are experiencing rapid growth
• Want to reward senior managers and future leaders
• Are preparing for a future sale or investment event
• Need to compete with larger employers for talent
• Want to create stronger employee engagement and ownership culture.

EMI arrangements are a complex area.  The structure of an EMI scheme, the type of shares used and the tax implications should always be reviewed carefully with your professional advisor before implementation.

Why Professional Guidance is Essential

Setting up an EMI scheme requires careful planning around valuation, eligibility, tax compliance and long-term commercial objectives.

SRLV’s Entrepreneurs Division works with businesses across a range of sectors to design employee incentive arrangements that support growth, attract talented employees and reward long-term success. We can help assess whether your business qualifies for EMI, explain the tax implications and guide you through the implementation process.

If you would like to explore whether an EMI scheme could benefit your business, please email our partner, Gavin Lenthall: gavin.lenthall@srlv.co.uk.

 

This material is published for the information of clients and contacts. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore, no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or SRLV LLP.