From 6 April 2026, the EMI scheme is being substantially expanded. The gross asset limit is quadrupling, the employee headcount limit is doubling, and the total value of options a company can grant is increasing. For growing tech businesses that have outgrown the current limits, or are approaching them, these changes open up options that may not have been available before.
The Enterprise Management Incentive (EMI) scheme has been the go-to equity incentive for UK tech companies since it was introduced. It lets qualifying businesses grant share options to employees with significant tax advantages, helping smaller companies compete for talent against larger, better-funded competitors whilst encouraging staff retention and rewarding their participation in the growth of the company.
What EMI offers
EMI options give employees the right to buy shares in their employer’s company at a price agreed when the option is granted. If the company grows and the shares increase in value, the employee benefits from that growth.
The tax treatment is what makes it attractive. Where all qualifying conditions are met, there is no income tax or National Insurance due when the option is granted or exercised. The gain is instead subject to Capital Gains Tax (CGT) when the shares are eventually sold. For the 2025/26 tax year, Business Asset Disposal Relief (BADR) may reduce the CGT rate to 14% on the first £1 million of qualifying lifetime gains, provided the employee has held the EMI option for at least two years before disposal. From 6 April 2026, the BADR rate increases to 18%.
Even at 18%, this remains considerably lower than the income tax and National Insurance that would apply to an equivalent cash bonus. The company may also be able to claim a corporation tax deduction on the gain when the option is exercised.
The April 2026 changes
The government announced these changes in the Autumn Budget 2025. They take effect for EMI options granted on or after 6 April 2026.
The gross asset limit is increasing from £30 million to £120 million. This is the total gross assets of the company or group at the time the option is granted. Many tech companies that have raised several rounds of funding, or that hold significant IP and equipment on their balance sheet, have previously breached the £30 million ceiling. The new limit brings a much larger group of companies into scope.
The employee headcount limit is increasing from 250 to 500 full-time equivalent employees. Tech businesses that have scaled their teams, particularly those with large engineering or customer success functions, may now qualify where they previously did not.
The total value of shares that can be subject to unexercised EMI options across the company is increasing from £3 million to £6 million. This is measured at the market value of the shares on the date each option was granted. The individual limit remains unchanged at £250,000 per employee.
The maximum exercise period is being extended from 10 years to 15 years. This is particularly relevant for tech companies that stay private longer than originally anticipated. Importantly, this change can also apply retrospectively to existing EMI options that have not yet expired or been exercised. Companies can amend existing option agreements to reflect the longer period without losing the tax advantages, provided the amendment is in line with the legislation.
From April 2027, the requirement to notify HMRC of individual EMI option grants will also be removed, though the annual reporting obligation remains.
Who qualifies
The expanded limits will bring more companies into EMI eligibility, but the other qualifying conditions remain unchanged. It is worth checking these carefully, as some are less obvious than they appear.
The company must carry on a qualifying trade. Most technology businesses will meet this, but there are specific excluded activities including financial services, property development, and leasing. Companies whose activities include receiving royalties or licence fees should check whether these are derived from intellectual property the company itself has created, as this affects qualification.
The company must be independent, meaning it cannot be under the control of another company. This is particularly relevant for tech businesses with private equity or venture capital backing, or otherwise complex corporate structures. Where investors hold rights that could give them control in certain scenarios, such as drag-along provisions or financial distress triggers, HMRC may challenge whether the company meets the independence test. This does not mean VC-backed companies cannot use EMI, but the share structure and investor rights need careful review.
Employees receiving options must work at least 25 hours per week for the company, or at least 75% of their total working time if less. They must not hold a material interest, broadly defined as 30% or more of the company’s shares. This can catch founders who want to grant themselves options alongside employees.
The shares under option must be ordinary shares, fully paid up, and not redeemable or convertible.
If there is any doubt about whether the company qualifies, HMRC offers an advance assurance process where the company can request confirmation before granting options. This is worth considering, particularly where the company structure is complex or where the trade involves activities close to the excluded categories.
What this means for growing tech companies
For tech businesses that currently qualify for EMI, the increased company option limit from £3 million to £6 million is the most immediately useful change. It gives more room to grant options to a broader group of employees, or to make larger grants to senior hires, without hitting the ceiling.
For those that have outgrown the current limits, the picture is more significant. Many tech companies that exceeded the 250-employee or £30 million gross asset thresholds moved to less favourable arrangements: Company Share Option Plans (CSOPs), growth shares, or unapproved options. From April 2026, some of these companies may be able to return to EMI for new grants.
If your company previously qualified for EMI but no longer does because of headcount or asset growth, it is worth reviewing whether the expanded limits bring you back into eligibility. Companies in this position may want to consider whether existing CSOP or unapproved options should be replaced with EMI options for future grants.
For companies with existing EMI options approaching their 10-year expiry, the extended exercise period to 15 years provides a window to retain the tax advantages without forcing premature exercise. This is relevant for companies where an exit event has taken longer than anticipated, or where the company has chosen to stay private.
What EMI does not do
EMI is not a universal solution. There are limits to what it covers and situations where it may not be the right approach.
The individual limit of £250,000 per employee has not changed. For very senior hires or co-founders, this cap may not provide sufficient equity incentive on its own, and other arrangements may need to sit alongside EMI.
EMI options are only available to employees (including directors who are employees and meet the working time requirements). They cannot be granted to consultants and contractors.
The requirement for the company to be independent means that PE-controlled companies will often not qualify, even under the expanded limits. Where a majority investor controls the company, EMI will not be available regardless of the asset or headcount position.
The tax advantages depend on conditions being met continuously from grant through to exercise. If a disqualifying event occurs, such as the company starting to carry on excluded activities, or the employee reducing their working hours below the threshold, the EMI tax advantages can be lost from that point. This can create unexpected tax charges that only surface during due diligence ahead of a transaction, when it may be too late to correct.
Getting it right
Setting up an EMI scheme involves valuing the shares, agreeing the exercise price with HMRC, drafting the option agreements, and registering the scheme. The valuation process is important because it establishes the base price from which growth is measured, and getting it wrong can undermine the tax position for every option holder.
The scheme design also matters. Vesting conditions, leaver provisions, and the events that trigger the right to exercise all need to reflect the company’s commercial objectives while staying within the EMI rules for example, if the scheme rules give the board discretion over when or how options can be exercised, HMRC may treat that discretion itself as a disqualifying event if it is not built into the scheme correctly from the outset. This is specialist territory and worth getting proper advice on from the outset.
Wilson Partners works with growing tech companies on EMI scheme design, implementation, and ongoing compliance. If the April 2026 changes bring your company into EMI eligibility for the first time, or if you want to review whether your existing arrangements are still the best fit, our technology team can help you work through the options.
