Change to EMI thresholds and what this means for businesses

HMRC has brought in reforms to the Enterprise Management Incentive (EMI) scheme. Kerry Southworth, senior associate solicitor in our corporate team, looks at what those reforms are, and whether any existing EMI option schemes can be amended to take advantage of the reforms.

What are EMI schemes?

EMI schemes are HMRC-approved employee share option arrangements designed to help qualifying companies recruit, reward and retain key staff.

Under an EMI scheme, selected employees are granted options to acquire shares in the company at a future date, usually at a fixed exercise price.

Provided the scheme and the company meet the relevant conditions, EMI options can offer significant tax advantages compared with other forms of employee remuneration, aligning the interests of employees with the long-term growth and success of the business.

What has changed to the EMI scheme?

From 6 April 2026 onwards, certain limits on EMI schemes have increased as follows:

• The cap on the value of a qualifying company’s unexercised options – from £3 million to £6 million
• Gross assets a qualifying company can have as a whole – from £30 million to £120 million
• The number of employees a qualifying company can have as a whole – from 250 to 500 employees
• The period that an option holder has to exercise (calculated from the option’s grant date) – from 10 years to 15 years
• The limit on the maximum value of shares subject to unexercised options has remained at £250,000 per individual.

Can existing EMI options be amended to reflect the new thresholds?

Many companies already have an EMI scheme in place and may want to amend the terms of their schemes to allow for the greater exercise period up to 15 years.

However, the other changes outlined above cannot be applied to EMI schemes that were put in place prior to the 2026/27 tax year.

Companies should exercise caution before amending any other terms of existing EMI options. HMRC takes the view that if there is a change to any of the fundamental terms of an option which improves the rights of the option holder, it could amount to a release of the existing option and the grant of a new one. This would significantly erode the tax advantages associated with EMI schemes.

However, HMRC has confirmed that companies can extend the exercise period up to 15 years, if they wish, without this being treated as a disqualifying event.

This is subject to a few conditions, including that any exercise takes places on or after 6 April 2026, and that the options so extended have not already lapsed, expired or been exercised at the time of variation.

What are the effects of these changes?

These changes represent a significant expansion of the EMI scheme by making it available for a much larger volume of businesses across the UK looking to attract and retain key employees.

Previously, the eligibility thresholds meant that many growing companies were forced out of the EMI regime at precisely the point when competition for talent was most intense.

For employees, EMI options remain one of the most generous share incentive arrangements available in the UK. For employers, the ability to offer meaningful equity participation is a powerful tool for recruiting and retaining talented individuals.

The expanded thresholds ensure that these benefits are no longer confined to the smallest start-ups but are now available to a broader range of growing businesses.

What’s next?

Although recent changes to the EMI thresholds create opportunities for businesses and employees, businesses should be alive to the potential risks of amending existing EMI options incorrectly.

HMRC’s waiver and guidance on permitted changes are very specific, and altering the terms of an option in the wrong way can inadvertently trigger a disqualifying event, which could in turn erode the available tax advantages or even amount to the grant of a new option.

The corporate team at Harrison Drury can help simplify the complexity by advising on, reviewing and amending EMI options in a compliant way to protect your business’ interests. If you need any advice, get in touch on 01772 258 321.