EMI scheme expansion: Opportunities for growing companies

The Enterprise Management Incentive Scheme (EMI) is a valuable UK tax-advantaged share option plan designed to help companies attract, retain and motivate key employees. By aligning employee interests with long-term business growth, EMI offers a flexible alternative to increasing salaries or offering upfront cash incentives.

From 6 April 2026, significant changes to the scheme will expand eligibility, opening the door for a broader range of companies to benefit.

What is the EMI Scheme?

Under the EMI Scheme, an eligible company can grant options to eligible employees, permitting them to purchase company shares at a fixed, often discounted price once certain conditions have been met. These conditions may include:

• remaining employed with the company for a specified period;
• achieving certain performance targets; or
• the company being sold to a third party

Once the condition is met under the terms of the option, the option can be ‘exercised’ and the employee can purchase shares in the company.

One of the key advantages of EMI is its favorable tax treatment. Provided the exercise price is not lower than the market value of the shares at the date the option is granted:

• no income tax or NI is payable on grant or exercise of the option; and
• when the shares are eventually sold, any gain realised is taxed by way of Capital Gains Tax rather than income tax and is therefore charged at a lower rate.

What’s changing in April 2026?

Historically, EMI has been targeted at smaller, high-growth companies. Many businesses outgrew the scheme as they scaled or were simply too big to start with.

From 6 April 2026, eligibility thresholds will increase significantly:

• Employee limit: increasing from 250 to 500 employees
• Gross asset limit: increasing from £30 million to £120 million

These changes mean that many mid-market companies that were previously excluded may now qualify.

The reforms also introduce greater flexibility in how companies structure their EMI schemes:

• The total value of unexercised options a company can grant will increase from £3 million to £6 million
• The maximum exercise period will extend from 10 years to 15 years

This enables businesses to design longer-term and more meaningful incentive arrangements for employees.

Who can benefit from the EMI scheme?

The EMI Scheme is available to independent trading companies operating outside certain excluded industries (such as banking, property development and legal services).

With the expanded thresholds, the scheme is now particularly relevant for:

• Scaling businesses transitioning into mid-market status
• Companies seeking to remain competitive in talent acquisition
• Employers looking for tax-efficient alternatives to cash bonuses

Implementation considerations

While EMI offers significant advantages, careful planning is essential to ensure compliance and preserve tax benefits.

Key considerations include:

• Confirming company eligibility
• Structuring and designing vesting and performance conditions under a bespoke share option plan
• Preparing compliant legal documentation
• Meeting ongoing reporting requirements for which failure to do so can result in loss of favourable tax treatment.

How we can help

Our team works closely with tax advisers to support businesses in implementing effective EMI schemes.

We can assist with:

• Assessing eligibility
• Designing tailored share option plans
• Drafting legal documentation
• Coordinating share valuations
• Providing ongoing advice as your business evolves

With the upcoming changes, now is an ideal time for businesses to review whether an EMI scheme could support their growth strategy.