Amongst all the Budget changes, one stood out as genuinely positive: a significant expansion of the Enterprise Management Incentive (EMI) scheme, effective from April 2026.
For growing businesses competing for talent, this could be a game-changer.
What makes EMI schemes powerful:
🔵 Employees pay Capital Gains Tax (not income tax) on gains – potentially saving over 20% in tax for higher earners
🔵 Companies can reward talent without major cash outlay
🔵 Everyone wins when the company succeeds – true alignment of interest
While the Budget had plenty of challenges for businesses, this is genuinely good news – especially for growth-stage companies.
Given the changes that become effective from April 2026, now may be the best time to assess your company’s equity benefits and employee participation:
🔵 With the increased limits, your company may now meet the new qualifying criteria to issue EMI options
🔵 If you already qualify, you may be able to extend more options to your employees, helping you retain more talent in the years to come
We view the new EMI limits very positively and would encourage you to assess whether an EMI scheme may be right for your business.
Hopefully our summary below provides some festive food for thought.
The UK’s EMI Scheme
The UK’s Enterprise Management Incentive (EMI) scheme is a powerful tool for aligning employees with company success. By granting tax-advantaged share options, EMI allows growing businesses to reward and retain talent whilst giving employees a real stake in the future.
🔑 What is an EMI Scheme?
🔵 An EMI is a tax-advantaged share option scheme designed for smaller, high-growth UK companies
🔵 Employees can be granted options to buy shares in the future at a fixed price, with gains typically taxed under Capital Gains Tax (CGT) rather than income tax
🔵 This means employees benefit from lower tax rates when they sell their shares, whilst companies can attract and retain top talent without heavy upfront cash costs
👩💼 Benefits for Employees
✅ No Income Tax or National Insurance Contributions when options are granted or exercised (if conditions are met)
✅ Gains are taxed at CGT rates (18% for basic rate taxpayers or 24% for higher/additional rate taxpayers) rather than income tax rates (which can be up to 45%)
✅ This represents a potential tax saving of over 20% for higher earners compared to receiving the same value in salary or bonus
✅ Employees share directly in the company’s growth, creating stronger alignment with shareholder interests
✅ Real financial stake in the company’s success
🏢 Benefits for Companies
☑️ A flexible, scalable way to attract and retain key staff without major cash outlay
☑️ Helps level the playing field for SMEs competing with larger corporates for talent
☑️ Options are only valuable if the company grows – making EMI a performance-driven incentive
☑️ Can be particularly powerful when recruiting senior hires from larger competitors
📊 Budget 2025 Changes (Effective 6 April 2026)
The Chancellor announced significant expansion of the EMI scheme:
🔵 Gross assets limit rises from £30m → £120m
🔵 Employee headcount cap increases from 250 → 500 employees
🔵 Company-wide unexercised options cap doubles from £3m → £6m
🔵 Option lifespan extended from 10 → 15 years (including existing options if amended)
📅 From 2027, companies will no longer need to notify HMRC of EMI grants, reducing admin burden and risk
👉 Critical point: All monetary limits (e.g., £250,000 per employee, £6m company-wide) are measured against the market value of shares at the date of grant. This valuation is central to compliance and requires professional assessment.
📈 Is Your Business Now Eligible?
Previously Excluded Companies May Now Qualify:
Tech scale-ups with 250-500 employees who were just over the old threshold
Capital-intensive businesses with £30m-£120m gross assets (manufacturing, logistics, property technology)
Later-stage companies preparing for exit or investment rounds who exceeded previous limits
Already Using EMI? You Can Now:
- Extend more options (company-wide cap doubled to £6m)
- Grant options with longer lifespan (15 years vs. 10 years)
- Reach more employees as you scale beyond 250 people
- Reduce admin burden from 2027 onwards
💡Example Scenario
A software scale-up with 280 employees and £40m gross assets would previously have been ineligible for EMI due to both headcount and asset limits. From April 2026, companies like this can now grant tax-advantaged options to their senior leadership team – a significant advantage when recruiting a new CTO from a corporate competitor who’s accustomed to equity participation.
🎯 What This Means for Your Business
If you’re a growing business trying to attract senior hires away from larger competitors, EMI schemes just became significantly more accessible and flexible.
Practical considerations:
✓ Valuation required: EMI schemes require proper share valuation at grant date (this is critical for HMRC compliance and ongoing administration)
✓ Professional setup: Requires coordination with legal and tax advisors – but with lower admin burden from 2027, ongoing costs will reduce
✓ Strategic integration: Works best as part of overall compensation strategy, not in isolation
✓ Timing advantage: Particularly valuable if you’re 12-24 months from potential exit or investment round, as employees can benefit from value creation in a timescale that motivates
⚠️ Important Considerations
EMI schemes aren’t right for every business. Consider these factors:
Setup requirements:
- Requires proper share valuation (cost and compliance requirement)
- Legal and tax advice needed for compliant structure
- Employees need clear communication about what options actually mean
Not suitable if:
- You’re planning immediate sale or IPO (insufficient time for value creation)
- Your business doesn’t meet qualifying criteria (trading company, independence tests)
- You prefer simpler compensation structures
Ongoing obligations:
- Requires administration (though simplified from 2027)
- Valuation updates for new grants
- Employee education and communication
You should seek professional advice to set up your EMI scheme.
Should Your Business Consider an EMI Scheme?
Questions to ask yourself:
- “How do we attract the best talent without Silicon Valley salaries?”
- “How do we retain our best people as we scale?”
- “Are we newly eligible under the expanded criteria?”
- “How do we create genuine ownership culture?”
The answer might be an EMI scheme – and April 2026 gives you time to set it up properly.
How a Fractional CFO Can Help
As your fractional CFO, I can support you through:
✓ Eligibility assessment: Determine whether your business qualifies under new rules and what limitations apply
✓ Financial modelling: Model the financial impact of different option structures and dilution scenarios
✓ Professional coordination: Work with your legal and tax advisors to ensure compliant, tax-efficient setup
✓ Strategic integration: Integrate EMI schemes into your broader compensation strategy and financial planning
✓ Valuation support: Coordinate share valuations and ensure documentation meets HMRC requirements
Next Steps
Want to explore whether EMI makes sense for your business? Let’s have a conversation in January before the April 2026 deadline.
The expanded EMI scheme is genuinely good news from the Budget – one of the few areas where growing businesses got a boost rather than a burden.
Make 2026 the year you level the recruitment playing field.
Get in touch to discuss your EMI options.
