Enterprise management incentives scheme now available to larger companies

What are enterprise management incentives?

The enterprise management incentives (EMI) scheme was introduced in 2000. Since then, thousands of companies have used it as an effective tool to attract, retain and reward their employees. When structured properly, EMI options enable employees to acquire shares in their employer company without liability to income tax or national insurance contributions on the growth in value. Instead, the gain is usually subject to lower rates of tax under the capital gains tax (CGT) regime.

Not all companies qualify to grant EMI options. There are several qualifying conditions to meet, including that the company must be “independent” and carrying on a qualifying trade. EMI was designed for small- and medium-sized enterprises and start-ups with growth potential. As such, there are also limits on the size of the company in terms of its gross assets and number of full-time equivalent employees.

Currently, a company can’t grant EMI options over shares with an aggregate market value of more than £3 million. In addition, the options will lose the tax benefits if not exercised within 10 years of the grant date, after which they will be subject to tax as “unapproved” options.

Major changes to enterprise management incentives from April 2026

Significant changes to the qualifying conditions will take effect from 6 April 2026, expanding access to EMI for many larger and fast-growing companies. From this date, key limits will increase as follows:

*Based on the tax market value of the shares as at the respective grant dates of the options.

Why the enterprise management incentives changes matter

The proposed changes were clearly heavily market-driven and designed with the needs of modern, high-growth scale-ups in mind. They will surely be welcomed by many companies which are currently too large to take advantage of the EMI scheme.  Such companies would otherwise need to use the generally less advantageous and more complex “older sibling” to EMI – the company share option plan (CSOP).

The doubling of the limit on the value of the shares under option and the five-year increase in the option lifespan will allow companies to significantly broaden their use of the scheme. Companies will be able to include a greater number of employees and/or grant “top up” options to key staff before exceeding the value limit. The extended lifespan will allow companies to incentivise staff for longer and take the pressure off an exit where this is perhaps further away than originally anticipated. Existing EMI options that have not been exercised can be amended to increase the lifespan to 15 years. This can be done without losing the tax advantages, provided the amendments are in line with the legislation set out in the Finance Bill 2025-26.

What is not changing?

It’s worth noting that despite these major changes, the limit of £250,000 per employee will remain unchanged. As this was last increased in 2012, this certainly feels like a missed opportunity to help start-ups and scale-ups compete with larger companies to attract key talent in an increasingly competitive job market. We are hopeful that a Budget in the not-too-distant future will increase the individual limit.

What companies should do next regarding enterprise management incentives

Companies should review how the upcoming EMI changes affect their plans and decide whether any action is needed. In particular, companies which…

• Previously ruled out EMI as a solution because of the current, more restrictive limits, should evaluate whether they may now qualify under the new limits (keeping in mind the other qualifying criteria which must be met)
• Now qualify to grant EMI options but historically used other types of share schemes (e.g. non-tax advantaged options or CSOP options) should consider whether it’s worthwhile cancelling existing awards and replacing them with EMI options
• Have an EMI plan in place should consider amending the existing plan documentation to allow future options to benefit from the 15-year lifespan and/or apply this change retrospectively to options previously granted under the plan
• Previously granted EMI options but then reached one or more of the limits should review whether they may once again be able to grant EMI options when the changes take effect

How we can help with enterprise management incentives

We have extensive experience in helping companies design and implement EMI plans and other share schemes, as well as with the ongoing administration. If you’re considering granting EMI options but aren’t sure whether your company qualifies, or if you need any assistance with your company’s existing EMI plan, we’ll be happy to help.