The Enterprise Management Incentive – or EMI – was one of very few items of good news for business owners in this year’s Budget.
For founders and company leaders, the Budget changes make the EMI much more attractive – especially for rapidly scaling small and medium-sized businesses. Large companies cannot take advantage of EMI.
Rachel Reeves announced that from 6 April 2026, the scheme would be expanded so more growing SMEs can take advantage of it. The idea is that it is good for employers because it can help retain crucial talent. But it’s also good for your employees due to its favourable tax treatment.
But can EMI help you and your small or medium-sized business? Let’s take a look at how it works.
What is the Enterprise Management Incentive?
If you own a SME, the Enterprise Management Incentive (EMI) is a government share-option scheme that allows eligible employers grant these options to certain employees. It gives them the right to buy shares at a pre-determined price. This is known as the ‘exercise price’.
It is usually equal to the company’s market value and offers tax incentives that larger companies can’t offer. For employees, the benefits are:
- No National Insurance or income tax to pay when you decide to exercise your option to buy shares.
- When the employee disposes of the shares (i.e. sells them) they may be taxed under more favourable Capital Gains Tax rules. This is usually much lower than the rates they would pay with ordinary income tax or National Insurance Contributions.
So how does that help employers?
If you’re an employer, you might be wondering how this can help your business.
According a recent report, 89% of SMEs can’t match large companies when it comes to pay. And that means that as an employee learns more and becomes more valuable to your organisation, there’s a chance you’ll lose them to a big business.
Using EMI means you can give your employees a reason to help you grow the business. The scheme helps because:
- You can attract and retain the best people over longer periods.
- It gives employees a sense of ownership in the company.
- Employees are rewarded if they help you grow the business and they share in its success.
- You benefit from a more committed and engaged workforce.
Having employees feel more involved in your business really does help. Research earlier this year from Harvard Business School that found employee-owned firms tend to weather economic downturns better than other companies. And a study in 2023 revealed that employee-owned companies are up to 12% more productive.
What changed in the Budget?
At the moment, only businesses with 250 full-time equivalent employees are able to use EMI. Also, the company must have gross assets of less than £30 million and the value of unexercised share-options is £3 million. Also, the exercise period is 10 years. There is currently an admin burden with EMI as you need to notify HMRC when EMI options are granted.
From 6 April 2026, the key changes are:
- Employee limit increased: firms up to 500 full-time equivalent employees (previously 250) will qualify.
- Gross assets threshold raised: companies with up to £120 million in gross assets (previously £30 million) will be eligible.
- Higher allowance for share-options: the total value of shares over which unexercised EMI options can exist at any time doubles — from £3 million to £6 million.
- Longer exercise period: the maximum time between grant and exercise increases from 10 years to 15 years. Importantly, companies can (if they want) amend existing EMI option agreements to take advantage of the longer period, without losing EMI tax advantages.
- Simplified administration: from April 2027, the requirement to notify HMRC when EMI options are granted is expected to be removed — reducing compliance burden.
Why do the changes matter?
Due to the changes, the Enterprise Management Incentive will be opened up to more companies, particularly those that want to scale up.
This gives them the chance to use the scheme as a retention tool, giving greater flexibility and longer horizons. That makes it useful for firms that need longer than 10 years to grow or to sell up the business.
By doubling the EMI share-options to £6 million, it helps firms with larger teams or higher-value shares. And removing the need to notify HMRC reduces the burden of compliance meaning its more attractive to than non-tax-advantage share plans.
What’s stayed the same?
There are some elements of EMI that will remain. These include:
The tax treatment. EMI will continue to be a tax-efficient employee share scheme with no tax when shares are either granted or exercised.
The qualification conditions remain. That means companies still need to carry on a qualifying trade, be independent (or within a qualifying group) and have a permanent UK base. The full list of conditions can be found here on the government’s website.
And the limit for EMI options remains at £250,000.
Is the EMI scheme for me?
We love helping our clients grow their business and the scheme could be right for you. If you’re not a client, contact our team today to have a chat about the Enterprise Management Incentive and how it could help your business. Or you can fill in the form below.
