Expanded eligibility opens doors for businesses with up to £120m in gross assets

The November 2025 Budget delivered transformative news for growing UK businesses. From 6 April 2026, the Enterprise Management Incentive scheme will become accessible to a significantly larger cohort of companies, marking the most substantial reform to employee share incentives in recent years.

For businesses that have outgrown EMI’s previous restrictions or dismissed it as unsuitable due to their size, this represents a pivotal opportunity to implement the UK’s most advantageous tax-efficient employee reward structure.

What is EMI and why does it matter?

Enterprise Management Incentives allow qualifying companies to grant share options to employees with exceptional tax benefits. When structured correctly, employees pay no income tax or National Insurance on option exercise, with gains typically subject only to Capital Gains Tax at favourable rates. For employers, EMI options offer corporation tax deductions and National Insurance savings.

This combination of flexibility and tax efficiency has made EMI the gold standard for start-ups seeking to attract talent whilst preserving cash. Until now, however, rapid growth has forced many successful companies to abandon EMI just as their talent needs intensify.

The November 2025 reforms: What’s changing

The changes allow companies with gross assets up to £120 million and up to 500 employees to qualify for EMI, dramatically expanding the scheme’s reach. These reforms take effect from 6 April 2026 and include:

Quadrupled asset threshold

The gross assets limit increases from £30 million to £120 million, recognising that capital-intensive scale-ups need equity incentives just as much as early-stage ventures.

Doubled employee headcount

Eligible companies can now have up to 500 employees (previously 250), acknowledging that growing teams need continued motivation as organisations scale.

Increased option pool

The company-wide cap on unexercised EMI options doubles from £3 million to £6 million, providing substantial additional capacity for new grants and broader employee participation.

Extended exercise period

EMI options can now remain unexercised for 15 years rather than 10, giving employees more flexibility and reducing pressure to exercise during inopportune market conditions. Crucially, this extension can apply retrospectively to existing options that haven’t expired or been exercised.

Simplified administration

From April 2027, companies will no longer need to notify HMRC of EMI grants, significantly reducing compliance burdens.

Who benefits from these changes?

The reforms specifically target businesses in that challenging middle ground: too large for traditional start-up incentives but not yet at a stage where public company arrangements are appropriate. The government estimates these changes will support approximately 1,800 high-growth scale-up companies over the next five years, benefiting around 70,000 employees.

You should reassess EMI if your business:

  • Previously exceeded the £30 million asset threshold but remains below £120 million
  • Has grown beyond 250 employees but employs fewer than 500 people
  • Exhausted the previous £3 million option pool and needs additional capacity
  • Currently operates less favourable Company Share Option Plans or growth share arrangements
  • Competes for talent against better-resourced international competitors

The compelling tax advantages

EMI offers unmatched tax efficiency compared to alternative arrangements. When structured correctly:

  • For employees: No income tax or National Insurance on option exercise (assuming the exercise price equals or exceeds market value at grant). Capital gains on subsequent share sales may qualify for Business Asset Disposal Relief, potentially taxing gains at just 14% (18% from April 2026) on the first £1 million of lifetime gains.
  • For employers: Corporation tax deductions based on the option gain, plus National Insurance savings averaging 13.8% on the value employees would otherwise receive as salary.

For a typical EMI option with a £200,000 gain, employees save approximately £90,000 in income tax and National Insurance compared to receiving equivalent cash remuneration. Meanwhile, employers save around £27,600 in National Insurance whilst obtaining corporation tax relief.

Steps to take to implement EMI

Companies newly eligible for EMI should move quickly to capitalise on these reforms:

  1. Review your current position: Calculate your gross assets (current assets plus fixed assets) and full-time equivalent employee count to confirm eligibility from April 2026. Remember that Northern Ireland companies trading in goods or electricity remain subject to previous limits due to subsidy control agreements.

  2. Audit existing arrangements: If you’ve implemented alternative equity incentives since outgrowing EMI, consider whether EMI would now offer superior benefits. Many businesses will transition existing option holders to the new regime.
  • Plan your option pool strategy: With the doubled £6 million cap, consider whether to broaden participation, increase grants to key individuals (up to the £250,000 per person limit), or reserve capacity for future hires.

  • Review existing EMI options: Companies with options approaching their 10-year expiry should assess whether extending them to 15 years would benefit option holders.

  • Engage professional advisers: EMI schemes require careful structuring to maintain qualifying status. Technical requirements around share classes, valuation agreements with HMRC, and maintaining qualifying trade conditions demand specialist input.

  • Consider timing: Whilst the changes take effect on 6 April 2026, planning should begin now. Implementing a robust EMI scheme requires board approval, legal documentation, valuation processes, and employee communication, all of which take time.

Looking ahead

These reforms position EMI as a genuine tool for scale-ups, not just start-ups. The government’s accompanying call for evidence on tax policy support suggests further enhancements may follow, reflecting policymakers’ commitment to strengthening the UK’s position as a leading destination for high-growth businesses.

For ambitious companies competing in global markets, EMI now offers a powerful mechanism to align employee and shareholder interests throughout the critical scaling phase. The expansion of eligibility thresholds removes a significant disadvantage UK businesses faced when competing for talent against international peers with deeper pockets.

The message from the November 2025 Budget is clear: the government recognises that growing companies need sustained support beyond their earliest stages. For businesses between £30 million and £120 million in gross assets, the time to explore EMI has arrived.

Next steps

To discuss whether your business qualifies for EMI under the new rules and how to structure an effective scheme, contact our specialist team. We provide comprehensive support including eligibility assessments, scheme design, HMRC valuation negotiations, and ongoing compliance support.

The opportunity to implement the UK’s most tax-efficient employee incentive structure is now available to significantly more businesses. Ensuring your company capitalises on these reforms could prove transformative for talent retention and your ability to compete for the best people in your sector.

Disclaimer

This article is provided for general information purposes only and does not constitute financial, tax, legal, or professional advice. The information contained herein is based on our understanding of current UK tax legislation and HMRC practice as announced in the November 2025 Budget, which is subject to change.

Tax legislation and regulations are complex and subject to individual circumstances. The tax treatment of Enterprise Management Incentive schemes depends on various factors including company eligibility, qualifying trade requirements, share valuations, and individual employee circumstances. The availability and extent of tax reliefs mentioned in this article may vary depending on your specific situation.

Every business is different, and what is suitable for one organisation may not be appropriate for another. Before making any decisions regarding EMI schemes or employee share incentives, you should seek professional advice tailored to your specific circumstances from a qualified tax adviser, accountant, or legal professional.

Whilst we endeavour to ensure the accuracy of the information provided, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, or suitability of the information. Any reliance you place on such information is strictly at your own risk.

HMRC’s interpretation and application of tax legislation may change, and this could affect the tax treatment of EMI schemes. We recommend verifying any information with HMRC or your professional advisers before taking action.

This article should not be considered as a substitute for obtaining specific professional advice regarding your tax position, and we accept no liability for any loss or damage arising from reliance on the information contained herein.

Tax rules and regulations in Northern Ireland may differ due to subsidy control agreements, particularly for companies trading in goods or electricity.