What’s changing for Enterprise Management Incentive schemes?

The Enterprise Management Incentive (EMI) scheme is one of the UK’s flagship tax-advantaged share option schemes, put in place for high-growth companies to attract and retain key talent.

Historically, only small, or early-stage companies qualified due to strict eligibility limits around assets (under £30m), employee count (fewer than 250 full-time employees), and restrictions on sectors (banking, farming, and shipbuilding being a few that were excluded).

In the 2025 budget, the Government introduced the biggest expansion of EMI eligibility since the scheme began. The move aims to unlock the scheme for more companies, boost employee ownership in UK companies, and increase the country’s competitiveness for attracting talent.

What’s changing in the reforms?

The changes to EMI listed below are set to come into force in April 2026 and cover a wide breadth of areas relating to the scheme.

EMI changes at a glance

Criteria	Current EMI Rules	New EMI Rules (from April 2026)
Gross asset limits	£30m max	£120m max
Employee headcount	Up to 250 full-time employees	Up to 500 full-time employees
Maximum unexercised EMI options (company-wide)	£3m	£6m
Maximum options per employee (individual cap)	£250,000 over a rolling three-year period	No change
Option exercise window	Options must be exercisable within 10 years	Extended to 15 years
Qualifying trade / excluded activities	Must carry out qualifying trade; certain activities excluded	No change
Working time requirement	Employee must work at least 25 hours/week or 75% of working time	No change
Notification requirements	EMI grant must be notified to HMRC within 92 days	Potential simplification from April 2027 (detail pending)

Increases to company eligibility limits

GOV.Uk confirms a four-fold increase in the permissible gross assets limits, rising from £30m to £120m. Combined with doubling the employee count to 500 full-time employees, the reforms will greatly increase the scope of the scheme and the companies that can benefit from it.

EMI option pool doubled

The total value of unexercised EMI options a company can grant will rise to £6m, doubling the permitted option pool. This is one of the most impactful changes for mid-stage companies, as most large scale-ups previously hit the £3m ceiling long before the asset or headcount limit. It is deemed to be particularly relevant for companies within technology, financial services, and professional services with equity-heavy reward models.

Theoretically, this should bolster retention strategies with companies now able to grant larger top-ups for promotions, create multi-tiered equity bands, and run more frequent refresh cycles of the scheme. There is also a reduction in pressure to reserve option headroom for future recruitment due to the increased pool to work with.

Organisations could see increased alignment between founders/investors and the wider employee base when approaching certain events: Series C/D funding, secondary transactions, pre-IPO preparation, or PISCES trading events.

If companies are using Company Share Options Plans (CSOP) alongside EMI, the expanded EMI pool may simplify incentives by reducing dependence on multiple schemes.

Extension of the maximum exercise window

The government have also lengthened the maximum permitted exercise window for EMI options, increasing from 10 years to 15 years, giving employees significantly longer to benefit from their equity. This extension is strategically important for growth-stage and pre-exit businesses, where timelines to liquidity often exceeds 10 years.

As an additional boon, the change applies retrospectively to existing EMI grants, provided they remain unexercised and have not expired. This is one of the few reforms that has immediate practical implications for companies with historic EMI schemes.

Although the legislation allows retrospective extension from 10 to 15 years, companies must still check their EMI plan rules and option agreements. If the governing documents specify a 10-year limit or prohibit amendments, the legal documents may restrict implementing the extended window unless formally amended.

Employees will also benefit from the extension, being granted more breathing room particularly in scenarios where markets are slow, their company chooses to grow independently rather than exit and reduces pressure to exercise early, which can trigger income tax if the exercise price is below market value.

The extension brings the scheme more in line with venture-backed growth patterns. In many sectors, especially tech and life sciences, liquidity events typically take 8-12 years, and can pass 15 years in deep-tech. This allows companies more flexibility when designing vesting schedules such as: extending vesting beyond four years, staggering vesting by tying it to growth milestones, and re-granting internally for promotions without losing long-term value.

The move hopes to improve competitiveness against norms seen in models used in the USA where exercise windows are typical in Silicon Valley models.

Future administration simplifications

The government intends to simplify EMI administrative requirements from April 2027, the change aims to reduce friction for businesses adopting or operating the scheme

The focus of the simplification is on reducing paperwork, notifications, and procedural traps that currently risk invalidating EMI options if companies miss strict deadlines. One area under review is the HMRC notification requirement, where companies must report EMI grants within 92 days, a frequent point of failure that causes options to lose tax-advantaged status. The likely direction of the reform is a move towards more automated or annualised reporting, removing, or softening the 92-day deadline, streamlines submissions through HMRC’s ERS portal, and clearer digital audit trails to reduce compliance risk. Pinsent Masons highlight that simplifying EMI administration could make the scheme significantly more accessible, particularly for companies without an in-house legal or HR function.

Simplification is expected to increase EMI adoption among first-time users and reduce the threat of accidental non-compliance. These changes would also bring EMI closer to the government’s wider digitisation plans, including HMRC’s Making Tax Digital programme, aligning share-scheme reporting with modernised portals.

The April 2027 changes aim to lower barriers to entry, encouraging more companies to adopt EMI as they scale, strengthening the UK’s incentive ecosystem in the process.

Who benefits from the changes to the EMI system?

High-growth scale-ups

The biggest winners of the reforms, these are companies that previously outgrew EMI eligibility due to asset or headcount limits who can now re-enter the scheme. This will have far-reaching effects for those in tech, life sciences, professional services consultancies, and high-growth B2B SaaS Companies. KPMG noted that the new thresholds finally reflect modern scale-up dynamics, rather than the start-up profile from the start of the millennium.

Later-stage private companies approaching liquidity events

Another big winner are businesses that are planning or in the process of raising Series C or Series D funding, secondary transactions, planning to IPO, or taking part in PISCES trading events. These benefit from the extended exercise window where exit timelines can stretch into double-digit years. Their employees are also safeguarded because the risk of options expiring before liquidity has been negated.

Employees in general

Access to EMI widens because more companies qualify. The large EMI pools mean companies can expand options to full teams, not just the leadership function, new joiners, promoted employees, and long-serving staff needing top-ups.

Employees gain longer exercise windows, lower tax exposure versus unapproved options, and more realistic timelines aligned with liquidity events.

Senior hires and executive talent

Typically, senior hires require larger equity packages. These are more achievable and realistic now because of the doubled company-wide limit that enables more robust leadership incentives. This gives privately-owned scale-ups more competitive and attractive options to offer when put against publicly listed companies or organisations based in the US.

Investors and the wider shareholder base

Higher equity participation aligns employee incentives with company value creation, theoretically increasing the value of the company to benefit all shareholders. EMI also offers a tax-efficient compensation route that is not cash-dependent, preserving runway. This gives investors improved retention and stronger alignment with long-term growth plans.

Companies currently using CSOP or unapproved options

Many businesses will now be able to migrate future grants away from these and back into EMI schemes, the tax advantages that come with it are significantly better than unapproved options. There will also be simplification as companies reduce the need to run overlapping schemes with complex rule sets.

First-time EMI users

Pending 2027 administration simplifications will reduce procedural risk and compliance complexity. This benefits potential first-time users such as regional SMEs, traditional sectors such as manufacturing and engineering, as well as owner-managed businesses scaling into larger teams.

The UK’s wider business ecosystem

These changes support the government’s objectives for economic growth, digitalisation, and talent retention. These form part of the broader shift to modernise private equity, employee ownership and tax administration.

What the EMI reforms don’t cover

Individual EMI grant limits remain unchanged

The £250,000 per-employee EMI limit (over a rolling three-year period) has not been increased. This is widely viewed as a significant missed opportunity, particularly for senior hires, key technical specialists, and long-term early employees. Experts have specifically called out this omission as surprising given the scale of other reforms. As a result, companies may still need CSOP or unapproved options to deliver meaningful equity to top talent.

Excluded trade categories remain unchanged

The reforms do not relax the list of excluded activities, including: banking, insurance, property development, farming, shipbuilding, and leasing. The current exclusions remained in place meaning that companies in these sectors still cannot access EMI, even if they meet the new thresholds.

Group structures and shareholder rules remain as-is

There were no changes to the rules relating to the parent company retaining 51% control, qualifying subsidiaries, or disqualifying arrangements. Private Equity firms are still at risk for EMI eligibility due to the common use of complex ownership structures.

Working-time requirement not updated

Employees must still meet the working-time requirement of at least 25 hours per week, or 75 percent of their total working time. This means there is no flexibility for hybrid or portfolio workers, nor for the growing number of fractional roles that exist within the C-suite. This remains a barrier for part-time specialists, as well as non-executive directors.

No changes to valuation processes or HMRC valuation agreements

Businesses must still obtain and maintain EMI-compliant valuations. There will also be no simplification for annual valuation cycles, expiry windows, nor for companies with rapid-growth valuation volatility which will mean that startups with fast-moving valuations will still face tight deadlines. EMI options must still be granted at or above HMRC-agreed market value to avoid income tax on grant. The reforms do not change the underlying requirement that discounted options trigger income tax on exercise.

Complexity remains for companies switching from existing schemes

For companies currently using CSOP or unapproved options, they cannot “convert” existing options into EMI, instead being limited to transitioning future grants. KPMG noted that this may require companies to update their equity strategy, re-sequence promotions/grants, and manage employee expectations.

Conclusion

The 2025 EMI reforms represent the biggest overhaul of the scheme for over two decades that shift EMI from a tool that companies might quickly outgrow into an initiative that supports the UK’s modern scale-up economy. With eligibility thresholds quadrupled, option pools doubled, and exercise windows extended, the system is now better aligned with the size, timelines, and realities of today’s high-growth companies.

These changes will allow thousands more businesses to offer competitive, tax-efficient equity packages that match rival international markets, strengthening the UK’s position as a hub for innovation and talent. Looking ahead, the April 2027 administrative simplifications and potential digitisation plans point to a far more streamlined and accessible EMI regime.

We’ll be following this blog with our guide on how companies can prepare for these changes internally.