UK expands tax-advantaged EMI share incentives scheme

For HR professionals and those involved in recruitment, one of the standout announcements from last week’s Budget was the major overhaul of Enterprise Management Incentives which was unveiled by Chancellor Rachel Reeves. It is a big moment for employers because EMI has long been the most effective way for high-growth companies to compete for talent, and these changes throw the doors wide open to a far larger group of businesses. For HR this goes straight to recruitment, retention, and fairness across teams, with many companies that previously “outgrew” EMI now back in scope. We’ll speak to a share plans expert about what this expansion means in practice and how HR can use it to strengthen their reward strategy.

Right now EMI is tightly restricted, but from April 2026 the landscape changes completely. The employee cap jumps from 250 to 500, the gross assets limit rises fourfold to £120 million, and the total value of EMI options a company can issue doubles to £6 million. In simple terms, companies that quickly grew out of EMI will be brought back into the regime, and fast-growing businesses that never qualified before will suddenly be eligible.

For HR this creates an opportunity to reset reward strategy. Employers can offer meaningful option packages to new hires again and close the gap between early EMI recipients and employees who missed out when the company became too big. The Chancellor has also extended the tax-advantaged exercise window from ten to fifteen years. That new limit will apply to options granted from April 2026 and can also be applied to many existing options, provided companies amend their option terms in line with the new rules.

As Pinsent Masons ‘Share Plans team explains in their Out-Law article, it all adds up to a significant reboot of EMI and a clear signal of support for high-growth companies. Described as a ‘game changer’ it means HR teams should be looking now at how EMI can be reintegrated into recruitment and retention plans as the 2026 changes come into view.

So let’s hear more on this. Lynette Jacobs is Head of the Share Plans team and earlier she joined me by phone to discuss it. So why is it a ‘game changer’?:

Lynette Jacobs: “It's a game changer because the changes announced by the Chancellor really increased and opened up EMI options to many companies that would no longer have been able to grant them or potentially haven't been able to grant them. So first of all, the number of employees that the company has - that's been doubled from 250 to 500 employees. Secondly, the value of the shares of which the options have been granted from the previous £3 million to £6 million, and then a quadrupling of the limits of the gross assets test - that's gone up from £30 million all the way to £120 million. What this means is that many companies that in the past had granted options when they were so-called startups, as the company grew so, obviously, the number of employees and the gross assets of the company had grown, they were no longer eligible to grant EMI options which meant that employees who joined later on in life when the company would be in a scale up situation, could not have those same tax advantaged options as their colleagues who were there at the beginning had. This also meant for companies, and for people in HR who have to deal with these things, that to be able to grant tax advantage options to employees who joined when the company no longer qualified for EMI, they would be going into other forms of incentive arrangements, typically growth shares known as MIPS, or MEPs, as well - management incentive plans, management equity plans - which can give tax advantaged treatment, but are much more complicated to set up and don't have the full tax advantages that EMI options have.”

Joe Glavina: “For HR teams who moved away from EMI perhaps because their business out grew the regime, is this now an opportunity to bring EMI back?”

Lynette Jacobs: “Yes, absolutely. I mean, as a share plans, expert, whatever, for my sins, I would always recommend to a company that if you can grant EMI options, those are the ones you should grant because, from the employees perspective, they receive their right to acquire the shares going forward and you can often have that designed so that they'll only actually ever be able to get the shares if there's an exit of the company so the money will be funded, effectively, by whoever's buying the company. There is no tax charge up front. You don't have to think about, sometimes with other forms of tax advantaged share arrangements that the employees are buying the shares themselves up front or, perhaps, having loan arrangements to buy them up front. If the employee leaves along the way, and they're not a good leaver, they just lose their options, you have to think about pulling shares back from them and, as well, a particular tax advantage that EMI options have, although the business assets disposal relief is not going as favourably as it was previously, nevertheless, if they acquire the shares on the excise option and sell them no less than two years after the option was granted to them, they are eligible for the, still favoured, capital gains tax lower rate under the business assets disposable relief.”

Joe Glavina: “The exercise window has increased from 10 to 15 years and it applies to existing options so it’s a positive story for current employees.”

Lynette Jacobs: “Yes, indeed it is. I mean, the 10-year life at the moment isn't something that clients necessarily sort of pick-up concern with but, that said, it may be the case that someone is holding on to an option that was granted to them and it's coming up to the 10th anniversary and if it is, as I say, one of these sort of so-called exit-only plans where they can actually only acquire the shares at such point as the company is sold, and that hasn't happened for whatever reason, their economic circumstances, commercial considerations, it hasn't been sold, and their options going to lapse after 10 years, or if you have what's technically referred to as a market value option, so that means the price the individual would pay when they exercise their option is what the value was of those shares when they received the option. So say it was 10p and, for whatever reason, the share price hasn't gone up, although they might be eligible to exercise the option, they're not because it would cost them more to buy the shares than the shares would be worth. In both of those cases it gives the opportunity for up to another five years during which either, in the first case, the company might be sold and they can exercise their option acquire the shares, or the share price does go up above their option price, and therefore they can excise their option and have the opportunity to make a profit.”

Joe Gavina: “What are the immediate steps that HR teams should think about taking now? I’m thinking here about communications and workforce planning.”

Lynette Jacobs: “Yes, firstly, to speak internally. So, whether it's the board or the Remuneration Committee, company secretary, whoever has responsibility for the EMI share plan and make sure they're aware of these changes. Secondly, check if the changes are going to help your company, and if so, and the decision is made that you're going to perhaps either restart grant EMI options, so make the decisions about who could now be receiving those EMI options, and then clearly get in touch and set up the arrangements for granting those options. If the decision is made to made to make a retrospective change to the rules so that the options can now be exercised up to 15 years from the grant date, speak to your lawyers so they help you make that amendment and arrange any board minutes for the relevant people to make pass those amendments and then, clearly, for any existing option holders, you need to contact them and explain to them the potential good news that their option will now have a five year longer life than they had expected it would otherwise. The other thing as well is, if you're in a company where you don't currently grant EMI options, and you never have, perhaps because you always had more than 250 employees, or your gross assets always were above £30 million, then, speak amongst yourselves and speak internally to say, look, these are really good things that we could now be offering, and it would be great and think about doing that instead of the incentive arrangements that your company currently has or, indeed, if your company hasn't put any incentive arrangements into place, any options, because you didn't qualify for those and just didn't fancy the potential tax disadvantage treatment of other incentive arrangements, look now at putting those in place, and then using it as a great communication exercise to your employees.”

The government’s policy paper on this is called: ‘Enterprise Management Incentive scheme: increasing the limits’ and it sets out how it proposes to increase the limits of the EMI scheme to make the scheme more accessible to scale-up companies. It was published on 26 November and can be accessed via the government’s website. We’ve included a link to it in the transcript of this programme for you, along with a link to Lynette’s Out-Law article which comments on it.

- Link to Out-Law article: ‘UK Budget 2025: EMI reforms potentially ‘game changing’

- Link to government policy paper: ‘Enterprise Management Incentive scheme: increasing the limits’