Changes for EMI options – can you now benefit?

Share options and awards are a critical tool to attract and retain talent, incentivising management and employees  to drive business growth in line with long-term corporate and investor goals. In addition, share plans can be structured to take advantage of significant tax and social security savings, for the company and employees.

EMI option schemes extended to larger trading companies

Enterprise Management Incentives (EMI) remain the most popular UK tax-advantaged share option scheme and are likely to become even more widely used this year.

EMI options can currently only be offered by smaller trading companies. However, from 6 April 2026, the government will extend access to larger companies. In particular:

• the gross assets threshold will quadruple from £30 million to £120 million

• the employee headcount limit will double from 250 to 500 employees.

These changes to EMI eligibility represent an exciting opportunity for larger companies to offer attractive, tax-advantaged incentives to their employees. This includes companies that have outgrown EMI as well as larger listed and overseas companies that may not previously have fallen within the scope of EMI. 

Further changes

Other changes coming into effect on 6 April are:

• increase to the limit on EMI scheme value, which will double from £3 million to £6 million; and

• extension to the limit on the EMI exercise period from 10 to 15 years.

In addition, as part of the government's aim to simplify tax favoured options and support employee liquidity, two recent updates are:

• Existing option agreements can be amended so that options can be exercised and the shares sold in a PISCES trading event, without losing valuable tax benefits. See our article for more information.

• From 2027, the EMI option grant process will be further simplified by removing the requirement for grant notifications.

Tax favoured options

The UK tax benefits can be substantial: qualifying EMI options with an exercise price set at or above the market value of the underlying shares at grant are generally exempt from income tax and national insurance contributions on exercise (including employer national insurance contributions). On the subsequent disposal of the shares, the full gain is then typically subject to capital gains tax. Business Asset Disposal Relief (BADR) may further reduce the tax burden on qualifying disposals to 14% (increasing to 18% from April 2026).

EMI options therefore have the potential to enhance a company's ability to attract and retain talent through equity participation in a competitive employment market.

Companies that remain too large for EMI, or do not otherwise qualify, may wish to consider other awards, including Company Share Option Plans (CSOP) as alternative tax-advantaged options.

What should companies do?

• In light of these developments, companies should assess whether they will be eligible to offer EMI options to their UK employees from 6 April 2026. Preparations can be undertaken now, including putting in place new plans where needed and agreeing valuations with HMRC, so that grants can be made soon after the changes come into effect.

• Companies should consider whether to extend the limit on the EMI option exercise period from 10 to 15 years, or whether to include an exercise trigger to enable sale of option shares in a PISCES auction – both of these changes may also be made to the terms of existing options but care should be taken to do this in line with the legislation; reliance on discretionary exercise triggers will not preserve tax-advantaged status.

• Those companies that still do not meet the EMI qualifying criteria can consider offering CSOP options or other long-term incentives.

Early engagement with advisers is recommended to ensure that any share option arrangements are structured to maximise available tax advantages, as well as aligning with the company's long-term corporate goals and global incentives strategy.

Our Employee Incentives team has extensive experience in designing and implementing share option plans and other employee incentive arrangements. For further information or assistance, please contact Claire Matthews or any member of our Employee Incentives team.