Employee share schemes are how a company lets staff share in growth without handing over cash today. EMI options (Enterprise Management Incentives) are the scheme most private UK companies reach…

Employee share schemes are how a company lets staff share in growth without handing over cash today. EMI options (Enterprise Management Incentives) are the scheme most private UK companies reach for, because the tax treatment is designed for that purpose. If you are asking "what are EMI options", the short answer is: a tax-advantaged right to buy shares later, at a price fixed now, if the company and the employee both qualify.

This article explains EMI share options for directors and founders in England and Wales. It is not a substitute for HMRC's manuals, and it is not tax advice on a particular grant. Scheme limits changed on 6 April 2026. Check the current GOV.UK pages before you grant.

What are EMI options?

EMI options are share options granted under Schedule 5 to the Income Tax (Earnings and Pensions) Act 2003. The employee receives a right, not the shares themselves. If they later exercise, they buy (or are issued) shares at the option price.

EMI share options are discretionary. You choose who gets them. That is different from all-employee schemes such as a Share Incentive Plan or Save As You Earn, which have their own rules. Types of employee share schemes beyond EMI exist; EMI is usually the first conversation for a trading company that wants to keep key people.

There is no income tax or National Insurance on grant. If the option price is at least the shares' unrestricted market value at grant, there is generally no income tax or NI on exercise either. Gain on a later sale is a capital gains question, and Business Asset Disposal Relief may be available if the statutory conditions are met. Rates change. Use HMRC's figures, not a blog post's memory.

An EMI share options tax calculator is only as good as the valuation and the facts you type in. It will not tell you whether the company is a qualifying company.

EMI scheme rules: who can grant and who can hold

HMRC's current guidance (updated 6 April 2026) is that most companies may operate EMI if they have:

  • gross assets of £120 million or less
  • fewer than 500 full-time employees
  • a total unrestricted market value of unexercised EMI options not exceeding £6 million

Until 5 April 2026 the equivalent figures were £30 million, fewer than 250 employees, and £3 million of unexercised options. Grants on or before 5 April 2026 were tested against those older limits. A specified Northern Ireland company (registered office in Northern Ireland, trading in goods or electricity) stays on the old limits. If that might be you, stop and read HMRC's EMI manual rather than this summary.

The individual cap has not been increased. An employee may hold qualifying EMI options over shares worth up to £250,000 (value at grant, across the group). Anything above that is not a qualifying EMI option on the excess.

The employee must work for the company (or group) at least 25 hours a week, or 75 per cent of their working time if lower, and must not already have a material interest above the statutory threshold. The company must be independent and must carry on a qualifying trade. Property development, banking, and several other activities are excluded. The full list sits in HMRC's guidance.

EMI options explained in one line for a board paper: they are a way to promise equity to chosen staff with a statutory tax wrapper, provided you stay inside HMRC's company, employee, and value tests. They are not a staff bonus scheme, and they are not the same as gifting shares today. Gifting shares now has different tax and a different effect on voting and dividends.

Employee share schemes UK also include CSOP, SIPs, and unapproved options. CSOP has a much lower individual cap. Unapproved options can still be useful when EMI is unavailable, but the tax on exercise is usually worse. If the company is not independent, or the trade is excluded, do not force EMI; structure something that will actually qualify, or say so.

For companies that qualify for the new limits, the maximum qualifying exercise period is 15 years for new options (it was 10). Existing unexercised options can, in many cases, be amended to the longer period without losing the tax advantages, if the amendment follows the option agreement and the legislation. The option must be exercised on or after 6 April 2026 to use the longer period.

An EMI options scheme is a set of company documents as much as a tax claim:

  • Board minutes and any shareholder approvals the articles require.
  • Option agreement (and often scheme rules) stating grant, vesting, leaver provisions, exercise events, and what happens on a sale.
  • Articles of association that allow the share class, any growth shares, and the issue or transfer on exercise.
  • Shareholders' agreement that deals with pre-emption, leavers, drag and tag, and what optionholders become when they exercise.

If the shareholders' agreement is silent, you will argue about dilution and leaver status the first time someone leaves. What to include in a shareholders' agreement is the companion piece for that document. EMI does not overwrite it.

Valuation should be agreed with HMRC where you need certainty on the £250,000 and company limits, and on whether the option is at market value. Guessing the price to "keep it simple" is how options fall out of EMI.

How do EMI share options work in practice?

A typical path is: agree who is in the pool, take a valuation, draft the rules and agreements, grant, notify HMRC, vest against time or milestones, then exercise on an exit or another permitted event.

Vesting is commercial, not statutory. Four years with a one-year cliff is common. It is not required. Bad-leaver and good-leaver wording should match the shareholders' agreement so you do not have two different answers.

Disqualifying events (for example the company ceasing to meet independence or trading tests, or the employee ceasing to meet the working-time test) can change the tax outcome if the option is not exercised in the statutory window. Build a diary, not an assumption that EMI lasts forever.

Telling HMRC

Register the EMI scheme if you have not already, then notify each grant within the deadline on GOV.UK. Missing the notification can strip the tax advantages for the company and the employee. The timetable has been updated more than once; do not rely on an old "92 days" rule without checking the current page. Keep the confirmation. HMRC's online service may not let you retrieve the form later.

You will also have annual employment-related securities reporting. From a later date HMRC has said the separate grant-by-grant notification is due to be removed, with annual returns remaining. Until that change is in force, follow the live GOV.UK instructions.

FAQs

What is an EMI share option scheme?

A discretionary, tax-advantaged option plan for qualifying trading companies and qualifying employees, with statutory caps on company size, option value, and the individual's holding.

Do EMI options dilute founders immediately?

Not on grant. Dilution happens if and when shares are issued on exercise, unless you have structured it otherwise. Model the fully diluted cap table before you promise a percentage.

Can we grant EMI options at a discount?

You can, but the discount is liable to income tax and NI on exercise. Most private companies grant at unrestricted market value to keep the EMI tax treatment clean.

What to do next

Confirm the company still qualifies under the April 2026 limits, then line up the articles, the shareholders' agreement, and the option wording so they tell the same story. Blackstone can review those documents together as part of shareholder agreements and disputes work, before a grant goes to HMRC with a hole in it.

Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.

Related reading