From 6 April 2026, the Enterprise Management Incentive scheme is open to a materially larger pool of UK companies. For EMI options UK scale-ups that previously outgrew the scheme, the April changes reopen the door. This article maps what changed, who now qualifies, and what companies with existing plans should do next.

Key Points

• From 6 April 2026, the gross asset threshold for EMI eligibility has quadrupled from £30 million to £120 million
• The maximum employee headcount has doubled from 250 to 500 full-time equivalent employees
• The company-wide option pool has doubled from £3 million to £6 million, valued at grant date
• The maximum exercise period has been extended from 10 to 15 years — this applies to new grants and can be applied retrospectively to existing unexercised options
• The individual limit of £250,000 per employee per three-year period remains unchanged
• From April 2027, the HMRC notification requirement on each option grant is removed, eliminating a significant layer of annual administration
• The government estimates the changes will support approximately 1,800 additional scale-up companies over five years, enabling equity participation for around 70,000 employees

Background and Context

EMI was introduced in 2000 to solve a specific problem. Smaller, high-growth UK companies could not compete with larger employers — or US tech firms — on cash compensation alone. EMI gave them a tax-efficient equity instrument to close that gap. On exercise of a qualifying option, no income tax or National Insurance contributions arise, provided conditions are met at grant and maintained throughout the holding period. Gains on the subsequent disposal of shares are subject to Capital Gains Tax at rates materially lower than income tax.

The problem was that the eligibility thresholds reflected the company profile of the early 2000s, not the modern UK scale-up economy. A company with £30 million in gross assets and 250 employees sits well below the point at which most VC-backed companies reach meaningful commercial traction today. Series B and Series C companies — precisely those where equity incentives are most operationally critical for talent retention — routinely exceeded these limits and were pushed into the Company Share Option Plan or unapproved option structures. Both are materially less advantageous. The revised thresholds make EMI options UK companies had previously outgrown fully accessible again.

Budget 2025 addressed this directly. how UK tech policy is reshaping the investment landscape provides the broader policy context — the EMI expansion sits within a wider government package designed to support the UK’s scale-up economy, alongside the EIS and SEIS extensions and the EMI notification simplification from 2027.

EMI Options UK Scale-Ups 2026: What Has Changed

The changes take effect for EMI contracts granted on or after 6 April 2026. Four substantive amendments are in force.

Gross asset threshold — £30m to £120m

The most structurally significant change. A company or group must now have gross assets not exceeding £120 million at the time of grant — a fourfold increase. Gross assets are assessed immediately before the share issue and include fixed assets, current assets, and intangible assets held on the balance sheet. Companies approaching Series C and beyond — which frequently hold significant cash from prior fundraising rounds alongside growing asset bases — will now clear this threshold with considerably more headroom.

Employee limit — 250 to 500 FTEs

The maximum full-time equivalent employee count doubles to 500. Employees working fewer than 25 hours per week are counted on a pro-rata basis. This limit applies to the company or group as a whole — including all qualifying subsidiaries. Companies with multiple entities in a group structure should assess consolidated headcount, not the employing entity in isolation.

Company option pool — £3m to £6m

The aggregate market value of shares subject to all unexercised EMI options across the company cannot exceed £6 million, assessed at the respective grant dates. Companies that previously exhausted the £3 million ceiling — typically Series B stage businesses with broad option programmes — can now grant further EMI options without waiting for earlier grants to be exercised or lapsed. For many mid-stage companies, this is the most immediately operational change.

Exercise period — 10 years to 15 years

EMI options must now be capable of exercise within 15 years of grant. This applies to new grants from 6 April 2026 and — crucially — to existing unexercised options, which can be amended to reflect the extended period without forfeiting tax-advantaged status. Given the structural pressures on the current state of UK VC exits in 2026, with IPO and M&A routes constrained and holding periods extending, the 10-year window was creating a specific retention risk. The extension resolves it directly.

Who Is Affected and How

Companies that previously outgrew EMI

Scale-ups that exceeded the previous £30 million asset threshold or 250-employee limit — and consequently migrated to CSOP or unapproved options — should conduct a fresh eligibility assessment. If the new thresholds are met, future grants can be structured under EMI. Existing CSOP or unapproved options cannot be converted retrospectively; the transition applies to new grants only. A fresh eligibility assessment is the logical first step for any EMI options UK strategy under the expanded thresholds.

Companies currently operating an EMI plan

Companies within existing eligibility limits should review whether the doubled option pool creates room for additional grants — top-up awards for promotions, new senior hires, or refreshes for long-serving employees whose original options have vested. Plan documentation should be reviewed to determine whether the 15-year exercise period amendment should be applied to existing options. Legal advice is recommended before making any amendments to avoid inadvertent disqualification.

PE-backed and group-structure companies

The EMI scheme requires the granting company to be independent — not controlled by another company. Companies under private equity control typically do not qualify regardless of size, as the PE firm’s controlling interest fails the independence test. This exclusion is unchanged. Companies approaching a PE transaction should factor EMI eligibility into pre-deal structuring conversations. Within qualifying group structures, the parent company can grant EMI options over its shares to employees of qualifying subsidiaries — but the subsidiary must carry on a qualifying trade and have UK presence.

Companies with foreign headquarters

A foreign-headquartered company can, in principle, grant EMI options to UK-based employees, provided the granting entity meets all qualifying conditions including UK permanent establishment. US-headquartered companies with UK operations should obtain advance assurance from HMRC before structuring grants on this basis.

Analysis: What This Means in Practice

The expanded thresholds are necessary but not structurally transformative on their own. EMI remains a point-in-time instrument — eligibility is assessed at grant, and a subsequent disqualifying event can cause options granted after that event to lose tax-advantaged status.

For companies in the £30 million to £120 million gross asset range, the April changes are unambiguously positive. The option pool increase from £3 million to £6 million is arguably more operationally significant than the threshold changes for many mid-stage companies — most Series B businesses were hitting the pool ceiling before they hit the employee or asset limit, constraining the scope of their incentive programmes.

ObvioTech analysis: the 15-year exercise extension is the most strategically important change for VC-backed companies. Exit timelines in the current UK market are stretching — closed IPO markets and suppressed M&A activity mean employees granted options today may be waiting longer than a decade for a liquidity event. Options expiring at the 10-year mark, before any realistic exit window, created a talent retention problem that the extension resolves cleanly. For companies operating exit-only option structures, the 15-year window provides meaningful additional protection.

The interaction with the broader incentive landscape matters too. the carried interest tax reforms that affect UK fund managers in 2026 shifted fund manager economics from the same date. EMI operates at the portfolio company level, not the fund level — but together, both reforms represent the most significant restructuring of UK VC and scale-up tax policy in a decade.

Timeline and Next Steps

The Finance Act 2026 received Royal Assent on 18 March 2026. The EMI provisions are fully enacted. There is no legislative uncertainty — companies can proceed with new grants under the expanded limits from 6 April 2026 without uncertainty about legislative status. HMRC advance assurance remains available and is recommended for any company where eligibility is not straightforward — it does not constitute a guarantee of qualification but provides a meaningful level of comfort before committing to a grant.

EMI, EIS and SEIS: The UK Incentive Stack in 2026

EMI operates at the employee level. It is an instrument for companies to incentivise their workforce through equity participation — distinct from, and complementary to, the investor-facing schemes. EIS and SEIS investor relief schemes extended to 2035 covers the investor dimension — income tax relief on qualifying share subscriptions, CGT exemption on gains, and loss relief on failures — all operating at the level of external investors rather than employees.

Budget 2025 brought both sides of the stack forward simultaneously. Expanded EMI eligibility for portfolio companies to reward employees. Confirmed 10-year EIS and SEIS extension for investors funding those same companies. For founders navigating both relationships — employees on one side, investors on the other — understanding how these instruments interact is increasingly central to capital structure and incentive design. The 2026 package, taken as a whole, is the most coherent alignment of UK employee and investor equity incentives since the schemes were introduced.

This article is for informational purposes only and does not constitute legal or tax advice. EMI eligibility is subject to HMRC qualification criteria and individual company circumstances. Companies should obtain qualified professional legal and tax advice before designing, granting, or amending EMI option plans.

Sources and Further Reading

• GOV.UK: Expanding the eligibility limits of the Enterprise Management Incentive scheme — Finance Act 2026 measure detail. gov.uk/government/publications/enterprise-management-incentive-scheme-increasing-the-limits
• HMRC: Enterprise Management Incentives — guidance for companies and employees. gov.uk/tax-employees-share-schemes/enterprise-management-incentives-emis
• KPMG UK: Budget 2025 — Enterprise Management Incentives expansion. kpmg.com/uk/en/insights/tax/tmd-budget-enterprise-management-incentives
• Grant Thornton: EMI reform 2026 — what mid-market and scale-ups need to know. grantthornton.co.uk/insights/emi-reform-2026
• HMRC: Venture Capital Schemes — advance assurance. gov.uk/guidance/venture-capital-schemes-apply-for-advance-assurance