Changes announced at Autumn Budget 2025 mean that, from 6 April 2026, more companies will qualify for the UK’s most attractive tax-advantaged employee share option plan. This article summarises these changes and looks at what employers should consider now.
EMI in a nutshell
EMI options already offer the most generous tax reliefs of any UK tax-advantaged employee share option plan. Provided all qualifying conditions are met on grant, and no subsequent ‘disqualifying event’ occurs, any growth in the value of the shares under option is free of income tax and National Insurance Contributions (NIC) on exercise. Capital Gains Tax Business Asset Disposal Relief could also potentially be available on the sale of the shares.
But as these advantages are carefully targeted, companies must meet detailed qualifying conditions before EMI options can be granted over their shares. Limits also apply to the value of shares that can be subject to unexercised EMI options, both for each individual employee and for employees overall.
The current position
In summary, the conditions that must be met to be an EMI ‘qualifying company’ currently include (but are not limited to) that the company or group where relevant has:
- Fewer than 250 full time equivalent employees (taking part-time employees into account on a just and reasonable basis and excluding certain other categories of employee); and
- Gross assets that do not exceed £30 million.
Failure to meet either of these requirements prevents EMI options from being granted over a company’s shares.
Where a company qualifies to grant EMI options, the maximum value of shares subject to unexercised options (measured on the date of grant of the option) cannot currently exceed:
- £250,000 per individual (for these purposes counting any unexercised tax-advantaged Company Share Option Plan (CSOP) options as though they are EMI options); and
- £3 million in relation to all unexercised EMI options.
The current legislation also provides that the exercise period for an EMI option may not exceed 10 years.
What’s changing?
The Government has announced important changes to the EMI qualifying company conditions. On and after 6 April 2026, provided all other qualifying company conditions are met, a company will be an EMI qualifying company where it (or its group where relevant) has:
- Fewer than 500 full time equivalent employees, up from the current limit of 250 employees; and
- Gross assets that do not exceed £120 million, up from the current limit of £30 million.
The Government has also increased the overall limit that, from April 2026, will apply to the market value of shares subject to all unexercised EMI options to £6 million, up from the current limit of £3 million. There has been no change to the individual limit of £250,000.
In addition, the maximum exercise period for an EMI option is to be extended from 10 years to 15 years. Whilst this change will apply for new EMI option grants from 6 April 2026, existing options may also be amended, in line with the forthcoming legislation, to provide for this extension without losing any EMI tax advantages.
The relevant changes will be included in Finance Bill 2025-26, which has not yet been published. However, the changes outlined above will not apply to certain companies registered in Northern Ireland, which will instead remain subject to the current limits.
Companies that have not previously qualified for EMI
Companies which have not implemented an EMI plan because of these limits should review whether, taking account of all the EMI qualifying company conditions, they might qualify from 6 April 2026. If so, they should consider whether EMI options would be preferable to, for example ‘growth’ shares, tax-advantaged CSOPs or non-tax-advantaged options for future equity incentive grants.
What should companies that have implemented EMI consider?
Companies that have already implemented an EMI plan, but which subsequently exceeded the number of employees and/or gross assets limits; or have hit the overall £3 million limit on the value of shares subject to unexercised EMI options, should consider whether they will be able to grant EMI options again from April 2026 and, if so, what part that should play in their equity reward strategy.
All companies that have implemented an EMI plan may also wish to consider amending plan rules to reflect the extension for the permitted life of an EMI option and whether they wish to extend the life of existing EMI options retrospectively.
Companies should also consider what changes the increased overall limit on unexercised EMI options might have on their grant policies (e.g. if an upcoming planned grant of non-tax-advantaged share options should be replaced in whole or in part by an EMI grant).
Other prospective changes
The Government has also announced that the requirement to notify HMRC of a grant of EMI options will be removed from April 2027. Currently, companies are required to notify HMRC by 6 July following the end of the tax year in which the EMI options were granted. This legislation will be included in Finance Bill 2026-27.
Tax system for scale-ups
The Government anticipates that the changes to EMI will support around 1,800 of the highest growth scale-up companies over the next five years, allowing them to reward an estimated 70,000 employees. The changes are also part of a wider Government package which aims to strengthen support for scale-up companies. The Government has also published a Call for Evidence on tax policy support, seeking views on the effectiveness of existing tax incentives, including EMI. It may therefore be that further changes are made to EMI in the future.
How KPMG can help
We have extensive experience advising companies on the design, implementation and operation of EMI plans, as well as all other types of employee share plans.
Please contact Jo Brien, Chris Barnes, James Greenwell or your usual KPMG contact, to talk through what opportunities the new EMI regime could present for your business.
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