Budget 2026: what it means for you and your business —
In short
An Enterprise Management Incentive (EMI) scheme lets you grant tax-advantaged share options to key employees, aligning them with the growth of the business. It is one of the most generous reliefs available to UK SMEs — but there are qualifying conditions on the company, the employee and the options, and a valuation must be agreed with HMRC. Get any of it wrong and the tax advantages are lost.
EMI lets a qualifying company grant share options to selected employees. The employee gets the right to buy shares at a price fixed today, and exercises that right later — typically on a sale of the company.
The advantage is the tax treatment: granted correctly, there is generally no income tax or National Insurance on grant or on exercise, and the eventual gain falls within the capital gains regime rather than being taxed as employment income. The company also generally obtains a corporation tax deduction.
The difference between an EMI option and an unapproved one, in cash terms to the employee, is very substantial.
There are conditions on the company (size, independence, and the trade it carries on — certain activities are excluded, including some property and financial trades), on the employee (working time commitment, and no material shareholding already), and on the options themselves (value limits, and a ten-year exercise window).
There is also a valuation to agree with HMRC, and a notification to make within a strict deadline after grant. Missing the notification deadline can lose the tax advantages entirely — it is the most common and most painful EMI failure.
From 6 April 2026, a company can grant EMI options if its gross assets are no more than £120 million and it has fewer than 500 full-time-equivalent employees. Each employee can hold unexercised options worth up to £250,000, the company-wide limit is £6 million, and options can be exercised for up to 15 years. Grants must be notified to HMRC by 6 July after the end of the tax year of grant.
There are alternatives, each with different trade-offs: Company Share Option Plans (CSOP), growth shares (which give employees only the upside above a hurdle, often keeping the entry cost low), and unapproved options (flexible, but taxed as employment income).
For some businesses, a straightforward bonus scheme tied to profit is the honest answer — equity is not always the right instrument, and it is irreversible in a way that a bonus isn’t.
Non-cash benefits — company cars, private medical cover, interest-free loans over the threshold, and much else — are generally taxable and must be reported on a P11D, with Class 1A National Insurance payable by the employer.
We handle the reporting and, more usefully, advise on which benefits are actually tax-efficient and which quietly cost more than the salary they replaced. Some are genuinely valuable; several are not.
EMI options must be notified to HMRC within a strict period after grant. Miss it and the tax advantages can be lost entirely — after all the work, cost and expectation-setting with your key employee. This is not a deadline to discover late.
Full EMI implementation — eligibility, valuation, agreement with HMRC, documentation, notification.
We tell you when equity is the wrong answer — sometimes a bonus scheme is more honest.
Valuations in-house — the share valuation is central and we do it ourselves.
Alternatives considered — CSOP, growth shares, unapproved options.
Joined up with your tax and corporate finance — options interact with any future sale.
This page provides general information about the 2026/27 UK tax year and is not advice on your particular circumstances. Tax and regulatory rules change frequently. Please contact us before acting, or refraining from acting, on anything set out here. LMJ Group is a firm of Chartered Accountants regulated by the ICAEW. LMJ Group is not a registered auditor and does not provide audit services. Last reviewed: July 2026.
