Enterprise Management Incentive (EMI) options, the UK’s main tax-advantaged way for a company to give staff a stake, became available to much larger businesses on 6 April 2026. This article explains what changed, how the scheme works in practice and where founders most often go wrong.
What changed on 6 April 2026?
The government raised four limits in the Finance Bill 2025-26, with effect from 6 April 2026, according to GOV.UK’s description of the measure. The stated aim is to “enable scale-ups to participate as well as start-ups”, helping companies attract and retain talent.
| Limit | Before 6 April 2026 | From 6 April 2026 |
|---|---|---|
| Company gross assets | £30 million | £120 million |
| Full-time employees | Fewer than 250 | Fewer than 500 |
| Total value of unexercised options | £3 million | £6 million |
| Maximum exercise period | 10 years | 15 years |
The individual limit did not move: GOV.UK’s employee guidance says a person can hold options worth up to £250,000 in a three-year period. Companies in Northern Ireland that trade in goods or electricity remain on the older limits because of subsidy-control rules, as the government’s policy paper notes.
The change matters because a business with a few hundred staff and a valuation in the tens or hundreds of millions previously fell outside the scheme. Many such companies are exactly those competing hardest for senior engineers and sales leaders.
How do EMI options actually work?
An option is a right to buy shares in future at a price fixed on the day it is granted. If the company grows, the employee can buy at the old price and hold shares worth more.
The tax advantage is the headline. According to GOV.UK, no Income Tax or National Insurance is due when an employee buys the shares, provided the price paid was at least the market value of the shares when the option was granted and the option is exercised within the permitted period. If shares are bought at a discount to that value, Income Tax and National Insurance can arise on the difference. Capital Gains Tax may apply when the shares are eventually sold.
That sequence is why EMI is prized. Growth in value between grant and exercise is not taxed as earnings. Instead, the gain is dealt with when shares are sold, under the capital gains rules rather than the payroll rules.
Which companies and employees qualify?
Beyond the size tests above, the company must be independent and carry on a qualifying trade. GOV.UK lists activities that rule a company out, including banking, farming, property development, legal services and ship building.
Employees must work for the company for at least 25 hours a week or, if less, 75% of their total working time. That requirement excludes many consultants, non-executive directors with other full-time roles and contractors who are not employees. Founders who are themselves employees can usually be granted options, but each case depends on the facts.
Those exclusions explain why some businesses use other routes. Part-time advisers, for example, may need a different arrangement altogether.
A worked example: grant, growth and exit
The figures below are illustrative arithmetic, not a forecast or a recommendation.
Suppose a company is valued by an agreed valuation at £10 per share on the grant date. An employee receives options over 20,000 shares at an exercise price of £10.
- Value of the shares at grant: 20,000 × £10 = £200,000, which is inside the £250,000 individual limit.
- Years later, the shares are worth £25 each and the employee exercises, paying 20,000 × £10 = £200,000 for shares then worth 20,000 × £25 = £500,000.
- The uplift of £300,000 (£500,000 − £200,000) is not charged to Income Tax or National Insurance at exercise, because the exercise price matched market value at grant.
- On a later sale, any gain over the base cost is assessed under Capital Gains Tax rules.
Had the options been granted at £6 per share when the shares were worth £10, the £4-per-share discount would be treated differently. On 20,000 shares, that discount is 20,000 × £4 = £80,000, and GOV.UK says Income Tax and National Insurance can be due on that difference.
How many people can a company reward?
The £6 million company-wide ceiling limits the total value of unexercised options at any time. At the maximum individual amount of £250,000, that is 24 people (£6,000,000 ÷ £250,000 = 24).
In practice, most grants are far smaller than the individual limit, so a company can reach many more people. A business granting options worth an average of £50,000 could cover up to 120 employees under the same ceiling (£6,000,000 ÷ £50,000 = 120).
The values are measured at grant, so growth after that point does not use up the allowance. A company that is expanding quickly may nonetheless find the ceiling relevant when it has already granted heavily to early hires and wants to reward later ones.
Does the longer exercise window help?
Yes, and more flexibly than the headline suggests. Options can now be exercised within up to 15 years of grant rather than 10. HMRC’s technical guidance says the longer limit applies to new options and that existing options can be varied to defer their exercise date, provided they have not already lapsed, expired or been exercised and the variation does not bring forward the exercise date.
For founders, a longer window reduces the pressure to force an exit or to trigger a tax event simply to avoid options expiring. It may suit businesses that expect a slow build or a late listing.
It also changes the conversation with long-serving staff whose older options were nearing their end date. A variation may be worth discussing with a professional adviser before any deadline approaches.
What do founders still get wrong?
Several practical failings recur, and none is changed by the new limits.
Missing the notification deadline
GOV.UK says that for options granted on or after 6 April 2024, HMRC must be notified by 6 July following the end of the tax year in which the grant was made. Before that date, the deadline was 92 days after grant. The guidance warns that failing to notify within the deadline risks “losing any tax benefits for you and your employees”. It also notes that the online service does not save details after submission, so copies of the notification and HMRC’s confirmation should be kept.
Treating the valuation as an afterthought
Because the tax result turns on market value at grant, the price used needs to be defensible. Companies commonly agree a valuation with HMRC in advance rather than rely on an informal estimate, particularly when funding rounds are close to the grant date.
Forgetting the working-time test
An employee who drops below the 25-hour or 75% threshold, or leaves a role, can put the status of their options at risk. Changes to roles should therefore be checked against the scheme’s conditions.
Ignoring what investors expect
Investors often ask about the option pool during a funding round, and the pool size and vesting terms become negotiating points. The wider funding environment, discussed in how founders are adapting to a tougher funding market, makes equity a more important currency when cash is tight.
How does EMI sit alongside other founder tools?
EMI is for employees. Investors in a company use different reliefs, which are covered in how EIS and VCTs work after the April 2026 changes. The two can sit side by side in one company, although each has its own conditions.
Equity is also a factor in why some owners decide to sell. Our look at why founders are selling early shows how ownership structure shapes exit decisions, and staff holding options can be an important part of that picture.
For very small teams, including the growing number of solo founders, EMI becomes relevant at the point of the first key hire, when a modest option grant can partly stand in for a salary the business cannot yet afford.
What the wider limits mean for ambitious companies
The enlarged scheme moves EMI from a startup tool to a scale-up tool. A company can now keep using it through later funding rounds, as its asset base and headcount grow, instead of having to switch to more complex arrangements.
The cost to the Exchequer is not small. GOV.UK’s policy paper estimates it at £70 million in 2026-27, rising to £695 million by 2030-31, and says about 5,200 companies granted EMI options in the 2023-24 tax year. Those numbers show the scale of the commitment, and they mean the rules will stay under review.
For founders, the useful point is that equity can now be offered for longer in a company’s life. The mechanics remain strict: correct valuation, timely notification and a clear record of who qualifies.
This article is general information, not personalised financial or tax advice. Rules, limits and rates change, so check current guidance or speak to a qualified adviser.
Sources: GOV.UK; HMRC
