How to set up and run an EMI scheme
EMI is the UK's most tax-efficient way to give employees share options, and from April 2026 it's open to far more companies. Here's how EMI works after the 2026 reforms, what it takes to set one up, and how to handle the valuations, filings and cap-table admin that come with it.
What is an EMI scheme?
An Enterprise Management Incentive (EMI) scheme lets qualifying UK companies grant employees share options with generous tax treatment: no income tax or NICs on exercise where options are granted at market value, and gains typically taxed under capital gains rules, with easier access to Business Asset Disposal Relief (Pinsent Masons; HMRC).
It's long been the most attractive UK employee share scheme, and the Autumn 2025 Budget widened it significantly from 6 April 2026 (Deloitte; Orrick).
EMI after the 2026 reforms
| Rule | Before | From 6 April 2026 | Source |
|---|---|---|---|
| Employee headcount limit | 250 FTEs | 500 FTEs | Deloitte; Orrick |
| Gross assets ceiling | £30m | £120m | Deloitte; Goodwin |
| Company-wide EMI options cap | £3m | £6m | Deloitte; Lewis Silkin |
| Maximum option life | 10 years | 15 years | Deloitte |
| Individual employee limit | £250,000 | £250,000 (unchanged) | Pinsent Masons |
The reforms open EMI to later-stage, capital-heavier scale-ups that previously failed the headcount or gross-assets tests (Goodwin; Lewis Silkin). From 6 April 2027, EMI grants will no longer require HMRC notification to maintain their tax status, though the annual ERS return remains (Lewis Silkin). Existing options can extend from 10 to 15 years (Deloitte).
The catch: the £250,000 individual limit didn't move
Every major limit rose except the £250,000 per-employee cap, the maximum value of EMI options (based on unrestricted market value at grant) an employee can hold over a rolling three-year period. Advisers have widely flagged this as a missed opportunity, particularly for senior hires and key specialists (Charles Russell Speechlys; Pinsent Masons).
The practical effect: for top talent who reach the cap, companies typically layer CSOP or unapproved options on top of EMI. Note that CSOP options count toward the same £250,000 EMI limit (Pinsent Masons).
This multi-scheme reality, EMI for most employees, CSOP or unapproved options for capped senior hires, is exactly where clean administration matters.
Does your company qualify?
HMRC; Pinsent Masons
- Have a UK permanent establishment and be an independent trading company
- Have no more than 500 full-time equivalent employees (from 6 April 2026)
- Have gross assets of no more than £120m (from 6 April 2026)
- Not carry on excluded activities (banking, insurance, property development, leasing, farming, legal services, financial services, and similar)
- Have no more than £6m of unexercised EMI options outstanding at the time of grant
- Meet the working-time test: work at least 25 hours per week for the company, or if less, at least 75% of their total working time
- Not hold a material interest (more than 30%) in the company
- Be over ordinary shares in the company
- Be granted at or above HMRC-agreed market value to avoid income tax on exercise
Setting up an EMI scheme: the six steps
- 1Confirm eligibility
Check the company and each participating employee against the tests above. Excluded activities are a common stumbling block.
- 2Agree a valuation with HMRC
Get unrestricted market value (UMV) and actual market value (AMV) agreed before grant. This is the step founders most commonly underestimate in time and complexity.
- 3Design the scheme
Set grant sizes, vesting schedule (4-year with a 1-year cliff is standard), exercise conditions, and leaver provisions.
- 4Adopt the scheme and grant options
Board and where required shareholder approvals, executed option agreements for each participant.
- 5Notify HMRC of the grants
Required by 6 July following the tax year of grant, until this requirement is removed from 6 April 2027 (Lewis Silkin; HMRC).
- 6Maintain it
Annual ERS returns, cap table updates, tracking vesting, exercises and leavers, and fresh valuations for each new grant round.
EMI isn't set-and-forget
Every new grant needs a current HMRC-agreed valuation. Notification and annual ERS return deadlines have real consequences if missed. Senior hires push you into CSOP or unapproved option layers that need tracking alongside EMI. And your cap table has to stay accurate through vesting, exercises, leavers and funding rounds. Missed valuations, late filings, or a messy cap table can jeopardise the tax treatment or surface problems in due diligence.
This is what GAIA handles: EMI and CSOP administration, valuations workflow, HMRC filings, grant and vesting tracking, and a clean cap table, in one place.
Talk to us about running your EMI scheme →Common questions
An Enterprise Management Incentive scheme is a UK tax-advantaged share-option scheme for qualifying companies and employees. Options granted at market value attract no income tax or NICs on exercise, and gains are typically subject to capital gains tax rather than income tax, with easier access to Business Asset Disposal Relief (Pinsent Masons; HMRC).
Running an EMI scheme without the admin headache
GAIA handles EMI and CSOP administration, HMRC filings, valuations workflow, grant and vesting tracking, and your cap table, so your scheme stays compliant and your team stays focused.