What are EMI share option plans, and are they a good idea for my company?

In the UK, we have a great tool to help achieve that goal: the Enterprise Management Incentives (EMI) scheme.

An EMI option is an employee share option that provides beneficial tax treatment, so that your employees feel like they have a real stake in your company, from inception to an exit. They are also well understood and appreciated by institutional investors, who see them as an effective and cost-efficient way to retain and incentivise employees.

From 6 April 2026 there will be changes to the requirements for EMI option schemes that should make them a compelling proposition for companies in the UK that are scaling up and would once have thought themselves too big for EMI options.

Below is a whistle-stop tour of EMI share option plans, to give you an initial idea of what they require and why their tax treatment makes them such a good proposition.

What is needed to set up an EMI Share Option Plan?

Unsurprisingly, as EMI offers great tax incentives, there are hoops to jump through to make sure your company and its employees qualify for it. The key requirements include:

• Your company cannot have another company holding 51% or more of its shares;
• The company must be trading and have a UK permanent establishment;
• The EMI option shares must be fully paid up, ordinary shares (including growth shares and restricted dividend shares);
• To be eligible to be granted an EMI option, an employee must work for the company for at least 25 hours per week, or if less, 75% of their working time; and
• EMI options can only be granted to employees; they cannot be granted to non-executive directors or individuals using a service company.

There are also some changes from 6 April 2026, designed to make EMI share option plans available to companies that are scaling up:

• The gross assets of the company must not exceed £120 million at the time of grant of the EMI option, which is an increase from £30 million;
• Your company must have fewer than the equivalent of 500 full-time employees at the time of the grant of the EMI option, which is an increase from 250 full-time employees;
• The limit on the total value of company options permitted under the EMI share option plan is £6 million, which is an increase from £3 million; and
• The limit on the exercise period for the options will be increased from 10 years to 15 years.

As with any tax‑advantaged scheme, the details matter. Please get in touch with us for more information, as rectifying mistakes in setting up an EMI option scheme is both expensive and complex, and often results in employees failing to benefit from the EMI tax advantages.

What are the tax advantages?

For your company:

• A corporation tax deduction may be available for a company when EMI options are exercised; and
• Relief is given to the employing company in the accounting year in which the options are exercised, with a deduction equal to the gain each employee makes.

For the employee who receives an EMI option:

• There is no income tax charge for the employee on the grant of the option (they would otherwise have to pay tax on the difference between what they pay and the non-discounted market value of the shares);
• There is no income tax for the employee on exercise, so long as the exercise price is at least equal to the market value of the shares at grant;
  • If the exercise price is less than the market value of the shares at grant, then income tax is due on the difference between the exercise price and the market value at grant;
• On the sale of the option shares, capital gains tax may be payable on any gain over the market value at grant; and
• If they have held the EMI options for at least 2 years before selling the shares, they may qualify for Business Asset Disposal Relief, reducing their capital gains tax rate (subject to meeting the relevant conditions).

How can Greenwoods help me?

We have extensive experience setting up EMI schemes for early-stage and scaling-up companies. We support companies from initial design through to grant and exercise, ensuring the scheme is robust, compliant and attractive to founders and employees. For further guidance or to discuss your specific situation, please contact our corporate & commercial team.