UK Budget 2025: EMI reforms potentially ‘game changing’

Lynette Jacobs of Pinsent Masons was commenting after UK chancellor Rachel Reeves confirmed in her budget speech on Wednesday that the EMI regime will be expanded, effective from 6 April 2026.

EMI options are intended to help smaller companies with growth potential to recruit and retain the best employees. They offer generous tax advantages to employees of those companies that qualify.

Currently, the EMI regime is open to employers with up to 250 employees. The government will increase this limit to 500 employees.

Other eligibility requirements will also be relaxed.

For example, currently, companies must not have gross assets exceeding £30m at the time the EMI option is granted to be eligible for the tax advantages under the scheme. The government will increase the gross assets test to £120m.

The company limit of £3m on the total value of shares that can be available under EMI options at any given time will also be increased to £6m, while the maximum period during which employees will be able to exercise EMI share options is to be increased from 10 years from the date of grant to 15 years.

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The changes, which will be introduced in the Finance Bill 2025-26, will generally apply only to EMI options granted on or after 6 April 2026. The extension to the period during which EMI options can be exercised in a tax-advantaged manner to 15 years can also apply retrospectively to existing EMI options which have not already expired or been exercised.

The government also plans to scrap current requirements for companies to notify their grant of EMI options to HM Revenue and Customs (HMRC) from April 2027. Legislation is also required to give effect to that measure, which the government said will be provided for in the Finance Bill 2026-27.

Lynette Jacobs said: “The quadrupling of the gross assets limit for EMI will be a real gamechanger, widening the scope of this highly flexible tax-advantaged share plan from a plan only for ‘start-ups’ to one which extends also to ‘scale-ups’.”

“Coupled with the doubling of the maximum value of options over which a company may grant EMI options and of the maximum number of employees that a company may have, it will likely also allow companies that granted EMI options in an early stage of their development, but which were then precluded by the gross assets limit and/or the company share value and/or employee number limit, to again grant EMI options, so aligning newer employees with those who joined the company at the start of its life,” she added.

The extension of the period during which EMI options can be exercised in a tax-advantaged manner from 10, to 15, years from the option grant date, is also “a welcome relaxation”, according to Jacobs: “The fact that this change can be applied to existing EMI options, with no detriment to their tax status, will benefit employees with subsisting EMI options in companies for whom the planned-for ‘exit’ has not materialised as quickly as had been hoped.”

“The package of changes to EMI options should be a real boost to the economy, increasing the ability for companies to attract, retain, motivate and reward employees in a manner which is tax-efficient for both employer and employee,” she added.

Other tax changes impacting start-up and scale-up companies were also announced in the chancellor’s budget, including changes to the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT) scheme. The government has also opened a broad call for evidence on tax support for entrepreneurs, citing its appetite to go further than the measures outlined in the budget to help companies avoid a “cliff edge” when their growth pushes them beyond existing thresholds for eligibility for support.